Interim Results
Centrica PLC
6 September 2001
Centrica plc
Interim Results
for the 6 months ended 30 June 2001
(unaudited)
SUMMARY
6 months 6 months Year ended
ended ended
31
30 June 30 June December
2001 2000 2000
as restated as restated
Turnover £6,753m £4,707m £9,933m
Operating profit * £437m £404m £526m
(including joint ventures and
associates)
Earnings* £343m £350m £389m
Operating cash inflow* £367m £484m £1,139m
Earnings per share* 8.6p 8.8p 9.8p
Dividend per ordinary share 1.2p 1.1p 2.8p
*before exceptionals and goodwill amortisation
Highlights:
* Record first half turnover and operating profit
* Record first half gas production
* British Gas energy supply operating profit up 15% despite domestic gas
margin squeeze
* Electricity progressed from investment phase to operating profit
* Continued growth in the AA
* Strong performance from North American acquisitions
* Sustained investment in growth opportunities across the Group
* Interim dividend up by 9%
CHAIRMAN'S STATEMENT
First Half Performance
The first six months of 2001 saw a record first half performance for Centrica
in terms of revenue and operating profit despite the squeeze on margins in our
UK residential gas business. First half turnover was up by 43% to £6,753
million and operating profit before exceptional charges and goodwill
amortisation was £437 million, 8% above the previous year. Turnover growth
excluding acquisitions and Accord was 13%. Earnings before exceptional charges
and goodwill amortisation were £343 million compared with £350 million in 2000
due to the impact of higher tax charges arising from higher gas production
profits.
Strategy and Outlook
Centrica's vision is to create value through the quantity and quality of its
customer relationships by 'Taking Care of the Essentials' and we have
continued to make good progress in delivering our strategy.
We maintained our market leadership in the supply of energy to the residential
market in Great Britain in a highly competitive marketplace. Residential gas
margins will show improvement in the second half with the full benefit of the
April 1 price rises. Our electricity business has moved into profit and at the
end of June we had more than 4.5 million customers. Following the introduction
of the New Electricity Trading Arrangements (NETA), we have complemented our
electricity supply activities with profits from wholesale energy trading and
the acquisition of gas-fired power stations. In addition we made good progress
in our British Gas Home Services business - adding value in support of our
Energy business.
We continue to improve the returns on our acquisitions: the AA is performing
well, both in Financial Services and Road Services. In August we acquired
Halford's garages, extending our range of motoring services under the AA
brand. We enjoyed a full six months of strong performance in North America,
where we are building our customer base in natural gas, and continue to
increase the number of customers contracted to take electricity once the
Ontario market opens to competition. We have taken our first steps in
acquiring a home services business in Canada to complement our energy
products. We continue to look for further opportunities to expand our presence
in the North American markets. Our investment in the Luminus NV joint venture
in Belgium offers us a base from which we will be able to develop our
continental European strategy.
We have maintained our investment commitment in Telecommunications, e-commerce
and Goldfish banking, all of which are in start-up phases. For Goldfish, we
are pleased that we now have a clear and orderly way forward migrating from
our existing credit card service-provider to enable us to pursue our growth
ambitions for the brand in partnership with Lloyds TSB. In our
Telecommunications business the recent acquisition of the profitable UK
One.Tel business has accelerated our plans and, with over 1 million active
customers we are now in a strong position to compete. Finally, we are
committing further investment in building integrated customer relationship
management systems across both the British Gas and the AA brands.
In summary, we continue to invest for long term growth, both organically and
by targeted acquisitions, and I believe there is considerable scope for
further value creation from the Centrica business model as we benefit from our
customer information, our channels to market and our brands.
Dividend
I am pleased to report the Board has declared an interim dividend for 2001 of
1.2 pence per share, an increase of 9% when compared with 2000.
CHIEF EXECUTIVE'S REVIEW
Group Results
Turnover
Group turnover from continuing operations at £6,753 million was 43% higher
than in the first half of 2000. Greater energy trading activity with higher
prices and volumes was responsible for a large part of the increase in
turnover but there were also strong contributions from higher non-residential
gas sales, growth in the electricity customer base in Great Britain and the
inclusion of sales in North America.
Operating Profit
Operating profit (including joint ventures and associates, before exceptional
charges and goodwill amortisation) of £437 million was £33 million better than
in the first six months of 2000, with British Gas energy supply profit up by £
58 million and North American energy supply profit contributing £29 million to
the increase. These improvements enabled us to invest more in growing our
telecommunications business (£32 million) and in the development of Goldfish
(£20 million) and e-commerce activities.
Centrica has adopted mark-to-market accounting in respect of its energy
trading activities and the prior year results have been restated. The effect
of the restatement was to reduce profits as previously reported for both the
first six months of 2000 and the year as a whole by £14 million.
Exceptional charges and goodwill amortisation
Exceptional charges of £13 million (2000: £3 million) comprised continuing
costs relating to the integration of the AA, acquired in 1999.
The goodwill amortisation charge for the period was £40 million (2000: £25
million), of which £25 million related to the AA, and £15 million related to
energy supply in North America. Goodwill of £56 million, which arose on the
Energy America acquisition completed in January, is being amortised over 15
years.
Net interest
Net interest payable was £20 million (2000: £17 million) and was covered 19
times by operating profit (including joint ventures and associates).
Taxation
The increased tax charge of £80 million (2000: £37 million) mainly related to
the higher profitability of our offshore gas production activities which are
ring-fenced for tax purposes. Taxable profits in other businesses are largely
offset by tax losses brought forward from earlier years. We incurred tax
charges of £7 million in North America.
Cash flow and balance sheet
Operating cash flow before exceptionals from continuing operations was £367
million compared with £484 million in the first six months of 2000. The
decrease largely reflects petroleum revenue tax (PRT) payments of £90 million
relating to our South Morecambe field and operating cash outflows within
Telecommunications. These were partly offset by new cash inflows in North
America.
Net assets increased by £246 million over the period to £1,439 million. Net
debt reduced from £117 million as at 31 December 2000 to £87 million as at 30
June 2001.
Customer Service
Customer satisfaction with British Gas, Goldfish and AA branded services has
improved. The number of complaints to energywatch was down 27% compared with
the same period last year. Complaints about electricity supply were down by
54% compared with the same period last year, even though customer volumes were
almost double. Home Services complaints were down by 14%, and gas supply
complaints were 33% lower. The AA level of service has also improved further
as measured by an external agency.
Performance by Business
UK
British Gas Energy Supply
Operating profit (including joint ventures and associates, before exceptional
charges and goodwill amortisation) was £443 million, an increase of £58
million compared with the first half of 2000. Increased gas production from
our own fields and positive contributions from electricity, and gas and
electricity trading, more than offset the effects of significant retail gas
margin pressure from higher input prices and certain one-off costs affecting
our gas supply business.
Gas Production
To offset the pressure on margins in our retail gas business in an environment
of high market gas prices, we have worked hard to maximise production from our
own fields, whilst at the same time assuring the long-term productivity of the
hydrocarbon reservoirs. Production for a six month period of 2.6bn therms was
a record, up 12% over the same period last year. We continue to add value to
our production assets with two significant projects completed within our South
Morecambe field during the period. An extended reach well, drilling some 2,500
feet out into the gas reservoir section, added some 70 billion cubic feet
(bcf) of reserves, and we successfully commissioned our South Morecambe
Onshore Compression project to maintain production pressure. These investments
of £60 million will enhance the delivery capability of the field by some 12%
this winter. Since the beginning of the year we have completed an acquisition
of additional equity reserves of 80 bcf at a cost of £5.9 million.
Profits from gas production increased substantially to £336 million from £91
million in the first half of 2000, almost all of which was attributable to
higher year-on-year contract prices. For segmental analysis purposes, we now
transfer gas from production to other parts of the Group at the arm's-length
market-related price on which tax is calculated, rather than at the uplifted
internal transfer price.
Residential Energy Market Share
Our share in the residential gas and electricity energy market in Great
Britain has remained at around 40% over the six months to 30 June 2001. We
were supplying 4.5 million residential customers with electricity as at 30
June 2001 (31 December 2000: 4.0 million), representing a residential market
share of 18%. In the residential gas market we had 13.6 million customers,
representing a market share of 68% (31 December 2000: 14.0 million customers -
as restated in accordance with the incoming Utilities Act definition of
residential customers).
Gas Supply
Our residential gas business showed an operating profit of £58 million in the
first half, compared with £305 million in the six months to June 2000,
reflecting the impact of higher gas prices enjoyed by our upstream business as
well as higher external gas costs and capacity costs. A residential price
increase averaging 4.7% was implemented in April 2001 after the peak winter
consumption period. Despite an overall loss of market share in a highly
competitive market, our gas sales volumes in the residential market in Great
Britain increased by 4% compared with the first six months of 2000 due to
higher consumption as a result of cold weather.
In response to this competitive market place, we have been successful in
reducing our residential cost-to-serve by some £46 million largely through
improved productivity. In the second quarter of this year, however, we
sustained a £58 million incremental cost in respect of the National
Transmission System (NTS) entry capacity auction. This additional cost is
expected to be recovered by the end of March 2002 through Transco price
reductions.
Compared with the residential market where the industry has borne the impact
of higher gas input costs, our non-residential gas business benefited from
volumes up 7% and selling price increases of 25% which counteracted a
substantial element of the increase in gas costs. Input costs were also
adversely affected by a £21 million loss in respect of strategic positions
entered into during 2000 and now terminated, and £5 million relating to the
NTS auction discussed above. Operating profit declined from £45 million in the
first half of 2000 to £20 million in the six months to June 2001.
The weighted average cost of gas to meet our supply requirements increased to
20.7p per therm compared with 14.3p per therm in the first six months of 2000.
Accord trading activities contributed £10 million to operating profit (first
half of 2000: loss of £11 million).
Electricity Supply
Our electricity business has progressed from a loss-making investment phase to
profit, even after costs of acquiring new customers in the period. Electricity
operating profit was £19 million (first half of 2000: loss £45 million), on
sales of 8.8 TeraWatt-hours (TWH) to an average of 4.2 million customers on
supply (first half of 2000: 5.4 TWH and 2.6 million respectively). We have
benefited from a fall in unit energy costs of 17% compared with those in the
first half of 2000 and unit transportation and distribution costs also reduced
by 13%. In the first half of 2001 a further £25 million of revenue investment
was made in growing the customer base, compared with £50 million in the first
half of 2000.
The New Electricity Trading Arrangements (NETA) became effective from 27 March
2001. We have introduced new electricity demand forecasting, energy balancing
and settlement systems as required by NETA. These systems have operated
successfully from start-up and we have managed our balancing exposure so that
our overall procurement costs have fallen further.
Any potential exposure to imbalance price volatility in the early months of
NETA was substantially mitigated by the use of forward contracts. Our stated
risk management strategy is to own generation equivalent to 20-25% of our
capacity needs. In May 2001, we acquired a 60% interest in Humber Power
Limited which owns and operates a 1,260 MegaWatts (MW) gas-fuelled power plant
at Stallingborough, Lincolnshire at an overall fully built up cost of £374/
KiloWatt (KW). The joint venture provides us with 750MW of peak output - more
than 15% of peak demand for our existing electricity customers. This power
station offers us increased flexibility, long-term stability and protection
against major changes in electricity price changes, and marks a significant
step towards our risk management goal.
In August 2001 we announced the acquisition of leases of approximately 20
years duration over power stations in Peterborough and King's Lynn. These have
a combined capacity of 705 MW.
We continue to be confident about the outlook for margins.
Accord is now trading profitably in both gas and power markets, and continued
to trade record volumes.
British Gas Home Services
Home Services' turnover increased by 12% to £339 million and operating profit
(before exceptional charges and goodwill amortisation) at £11 million was up £
2 million on the first half of 2000.
During the first six months of 2001, the number of gas service cover contracts
increased slightly to 3.28 million. We made significant progress in
cross-selling new products under the British Gas brand. Plumbing contracts
were up 24% to 624,000 and kitchen appliance breakdown cover contracts
increased by 49% to 311,000. In June, Centrica acquired National Homecare
which added a further 80,000 kitchen appliance contracts as well as a trained
workforce of around 100 engineers. In the period, we have also successfully
completed a pilot of a new home electrical cover product, which is being made
available nationally.
British Gas central heating system installations at 51,500 were 17% up on the
same period last year. Our home security business continues to be one of the
UK's largest suppliers of monitored alarms for the home with installations of
new British Gas security systems of over 8,000 during the period, up over 30%
on the same period last year.
We are aiming to grow our revenue through increased product innovation and
through tailored pricing in order to enhance margins.
AA Road Services
Road Services' turnover increased 3% to £233 million and operating profit
(before exceptional charges and goodwill amortisation) at £22 million was up £
4 million on the first half of 2000.
The unsettled weather in the first quarter of the year affected breakdown call
volumes, which were higher than normal. Even with 2.1 million motorists
breakdowns in the period, our average 'call to arrive' time was still 35
minutes.
Total AA membership grew from 10.9 million at 31 December 2000 to over 11.5
million as at 30 June 2001, of which personal and associate AA members
numbered 6.5 million. Retention rates remain high at 85%. In the business to
business market, further membership growth of 14% has been experienced in both
fleet and manufacturer contracts, from 4.4 million at 31 December 2000 to 5.0
million at 30 June 2001.
In August we completed the acquisition of Halfords' garages - the UK's largest
independent chain of car service, maintenance and repair centres - for £5.75
million. The 129 garages will be re-branded AA Service Centres and will offer
our customers a high quality and trustworthy service.
We continue to believe that there is the potential to add additional higher
margin motoring products and services under the AA brand, increasing
profitability further.
AA Financial Services
AA Financial Services increased turnover by 15% to £69 million and made an
operating profit in the period (before exceptional items and goodwill
amortisation) of £16 million (first half of 2000: £15 million).
The AA remains the UK's largest independently-owned insurance intermediary
with 1.5 million policies. We have rapidly developed our e-commerce capability
and this growing channel accounts for 40% of all motor quotations by the AA so
far this year. The UK insurance industry has recognised our success, placing
our web site first in its annual awards, the second consecutive year we have
won this accolade.
Compared with the first half of 2000 motor premiums are still rising sharply
and, despite an intensely competitive market place, we continued to improve
our motor new business with a 1.5% increase in policies, helped by the
introduction of new insurers onto the panel of underwriters. The benefit from
extensive advertising campaigns which have been running since April 2001 was
seen in an increase of 4.9% in home insurance policies compared with June
2000.
The internet has also supported growth in our direct lending operation, run
jointly with our partner, Bank of Scotland. Demand for loans is running at an
all time high and the personal loan book of nearly £400 million is up 21.7%
since 31 December 2000.
We believe there are further growth opportunities for the AA brand in the
financial services business. An independent financial advisory business was
launched in April 2001 and has promoted a number of savings, investment and
assurance products to date.
Goldfish Financial Services
The operating loss of £22 million in the first half of 2001 is after incurring
revenue investment costs of £20 million in developing our Goldfish banking
proposition. This venture with Lloyds TSB plc, in which we hold a 70% economic
interest, will combine the Goldfish brand and Centrica's customer care and
marketing skills with advanced systems and banking expertise.
The Goldfish credit card has maintained its position prior to the impending
termination of the joint venture with HFC Bank. At the end of June 2001
receivables were £660 million (June 2000: £585 million) and cards in force
remained at just over 1 million.
In August Centrica reached an agreement whereby we acquire HFC Bank's entire
rights and interest in the Goldfish credit card. HFC will receive a
consideration of £85 million (net) in excess of the nominal value of the
receivables of approximately £650 million. Our investment to acquire these
interests will be amortised in line with generally accepted practice for
similar transactions.
This agreement enables Centrica to continue with the launch of the Goldfish
banking proposition with our partner Lloyds TSB. The delay in resolution of
the situation with HFC has put back the first product launches of a savings
account, mortgages and current accounts which are now scheduled for the first
half of 2002.
Telecommunications
The telecommunications business was launched in September 2000 under the brand
name 'British Gas Communications'. Turnover in the first half of 2001 was £14
million and the operating loss for the period in this start up phase was £52
million. Revenue investment of £32 million was incurred in the acquisition of
customers. As at 30 June, 449,000 customers were taking services, 291,000 of
whom were active in the previous 60 days.
Acquisition and retention of customers has been tougher than expected with
competitor activity and the lack of both Carrier Pre-Selection (CPS) and a
single telephone bill being significant contributory factors. We continue to
believe that industry restructuring is required to encourage a level
competitive playing field.
On 3 July, we purchased One.Tel (UK) for a consideration of £58 million
including assumed net liabilities. The acquisition of One.Tel, a switched
reseller and one of the largest alternative consumer telecommunications
providers, resulted in a combined base of over 1 million active customers.
One.Tel adds a strong telecommunications brand to the portfolio and will
address customer segments which could not have been as easily reached through
the British Gas brand. This acquisition enhances the product development
capability of our telecommunications business, and brings forward progression
from investment phase to profitability.
Other Activities
Other Activities include the AA publishing, traffic and travel, driving
school, and signs businesses, and most of the Group's e-commerce developments,
including website. The operating loss (before exceptional charges
and goodwill amortisation) of £10 million for the period (2000: loss £7
million) reflected principally investment of £7 million in e-commerce
development.
Following a major redevelopment programme, website was
successfully re-launched in January to provide an unrivalled source of on-line
traffic, travel and motoring information. Importantly, the new website has
resulted in a significant increase in on-line sales of AA services, including
membership and insurance, and currently has 1.2 million users per month.
The next major e-commerce roll-out will be our 'Home Essentials' portal which
is expected to be launched in the fourth quarter of this year.
We will continue to invest in our e-commerce channels during the remainder of
2001.
North America Energy Supply
We have been very pleased with the progress of our North American business.
Our energy supply activities - under the Direct Energy and Energy America
brands - generated turnover of £432 million during the six months to June
2001. We had no equivalent activities in the first half of 2000, although the
businesses we acquired had turnover of £320 million for that six month period.
Operating profit in the first half of 2001 (before exceptional charges and
goodwill amortisation) was £29 million, after expensing £14 million of revenue
investment incurred in growing the customer base.
During the first half of the year, gas customer numbers in North America
increased by a net 110,000 to 1.3 million (1.5 million Residential Customer
Equivalent - adjusting small business customers to an equivalent number of
households). In Canada, by 30 June 2001, over 470,000 customers in Ontario
(950,000 Residential Customer Equivalent) had signed 5 year contracts to buy
electricity from Direct Energy, when the power market opens, expected to be by
the end of May 2002. The business continues to acquire additional electricity
customers in advance of market opening. With commodity price volatility now
firmly a consumer issue, price guarantee programmes, such as those developed
by Direct Energy and Energy America, are emerging as the key beneficiary of
deregulation and customer choice.
In line with our risk management policies, own production in Canada of 17.4
bcf provided some 23% of our supply requirements. The business had gas
reserves of approximately 245 bcf (proved) and 216 bcf (probable) at 30 June
2001.
In May the company acquired the remaining 70% of Greensource Limited, a
heating, ventilation and air conditioning service business based in Ontario.
This acquisition will be used as the basis for developing a broader range of
branded customer propositions as well as enabling cross marketing of energy
and services products.
Continental Europe
In June we announced the acquisition of a 50% interest in Luminus NV, an
energy supply business in Belgium. The partners in this joint venture are a
consortium of five Flemish municipal utilities. This establishes a presence in
Continental Europe at the formative stage of the development of a competitive
market. We are working with a number of industry groups in support of a more
rapid development of an effective competitive structure.
Outlook
While domestic gas margins remain affected by higher gas costs, the
performance of our other businesses in the first half is encouraging and gives
us the confidence to continue to invest in the growth opportunities we see
across Centrica. We have a record of improving the performance of our
acquisitions, notably the AA and in North America, where we are ahead of our
original assumptions and look to further progress. Our strong cashflow and
balance sheet enables us to consider further value-creating acquisitions in
line with our stated strategy.
After our strong performance in the first half, and taking account of planned
levels of investment and the outlook for gas costs, we are moving forward with
confidence and expect to achieve satisfactory progress for the year as a
whole.
Roy Gardner
Chief Executive
6 September 2001
Independent review report to Centrica plc
Introduction
We have been instructed by the company to review the financial information
which comprises the profit and loss account, the balance sheet, the cash flow
statement, the statement of recognised gains and losses and the related notes.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the
Listing Rules of the Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999
/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of Group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than
an audit performed in accordance with United Kingdom Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2001.
PricewaterhouseCoopers
Chartered Accountants
1 Embankment Place
London WC2N 6RH
6 September 2001
Summary Group Profit and Loss Account
Year
6 months 6 months ended
ended ended 31
December
30 June 30 June
Notes 2001 2000 2000
£m £m £m
as as
restated restated
Turnover:
Continuing operations before acquisitions 6,660 4,707 9,933
Acquisitions 93 - -
Continuing operations 1 6,753 4,707 9,933
Cost of sales 2 (5,524) (3,588) (7,921)
Gross profit 1,229 1,119 2,012
Operating costs before exceptional charges and 2 (805) (723) (1,504)
goodwill amortisation
Exceptional charges and goodwill amortisation 3 (53) (28) (74)
Group operating profit 371 368 434
Share of profits less losses in joint ventures 13 8 18
and associates - continuing operations
Operating profit including joint ventures and
associates:
Continuing operations before acquisitions 383 376 452
Acquisitions 1 - -
Continuing operations 1 384 376 452
Net interest payable (20) (17) (28)
Profit before taxation 4 364 359 424
Taxation 4,5 (80) (37) (109)
Profit after taxation 284 322 315
Minority interest 6 - -
Profit after taxation and minority interest 290 322 315
Dividends 6 (48) (44) (112)
Retained profit for the financial period 242 278 203
Dividend per ordinary share 6 1.2p 1.1p 2.8p
Earnings per ordinary share:
Basic 7 7.3p 8.1p 7.9p
Diluted 7 7.2p 8.0p 7.8p
Adjusted Basic 7 8.6p 8.8p 9.8p
Memorandum: £m £m £m
Operating profit (before exceptionals and goodwill 1 437 404 526
amortisation) including joint ventures and associates
Profit before tax, exceptionals and goodwill amortisation 4 417 387 498
Earnings before exceptionals and goodwill amortisation 4 343 350 389
Summary Group Balance Sheet
As at As at As at
30 June 2001 30 June 2000 31 December
2000
£m £m
£m
Fixed assets
Intangible assets 1,347 966 1,309
Tangible assets 1,841 1,800 1,936
Investments 105 33 57
3,293 2,799 3,302
Stocks 140 79 123
Debtors due within one year 1,604 1,287 1,734
Debtors due after more than one year 42 73 43
Cash and investments 241 378 214
Creditors due within one year (2,573) (1,715) (2,649)
Net current (liabilities)/assets (546) 102 (535)
Total assets less current liabilities 2,747 2,901 2,767
Creditors due after more than one (144) (166) (170)
year
Provision for liabilities and charges (1,164) (1,468) (1,404)
Total Assets less Liabilities 1,439 1,267 1,193
Shareholders' funds 1,439 1,267 1,193
Minority interest - - -
Total Capital and Reserves 1,439 1,267 1,193
Movements in Shareholders' Funds
6 months ended Year
30 June ended
6 months ended
30 June 2000 31
December
2001 £m
2000
£m as restated
£m
as
restated
Shareholders' funds at 1 January as 1,193 967 967
previously stated
Prior year adjustment - 14 14
Shareholders' funds at 1 January as 1,193 981 981
restated
Profit on ordinary activities for the 290 322 315
period
Dividends (48) (44) (112)
Shares issued 16 41 43
Reserves transfer (10) (33) (34)
Goodwill adjustment (i) (2) - -
Shareholders' funds at period end 1,439 1,267 1,193
(i)The goodwill adjustment arose on the acquisition of the balance of 72.5% of
Energy America not previously owned by the Group.
Statement of Total Recognised Gains and Losses
6 months ended Year
30 June ended
6 months ended
30 June 2000 31
December
2001 £m
2000
£m as restated
£m
as
restated
Profit for the financial period as 290 336 329
previously stated
Prior year adjustment - (14) (14)
Total recognised gains for the 290 322 315
financial period
Summary Group Cash Flow Statement
6 months 6 months Year
ended ended ended
30 June 30 June 31
Note December
2001 2000
2000
£m £m
£m
Net cash inflow from operating activities 9 337 441 1,063
Dividends received from joint ventures 13 2 10
and associates
Returns on investments and servicing of 10 (15) (9) (13)
finance
Taxation (32) (27) (147)
Capital expenditure and financial 11 (79) (55) (165)
investment
Acquisitions 12 (103) - (590)
Equity dividends paid (68) (60) (103)
Cash inflow before financing 53 292 55
Management of liquid resources (37) (81) 92
Financing 15 (204) (159)
Decrease/(increase) in net overdraft 31 7 (12)
Reconciliation of debt, net of cash and investments
£m £m £m
Debt, net of cash and investments as at 1 January (117) (127) (127)
Debt acquired (28) - (56)
Net increase/ (decrease) in money market investments 37 81 (92)
Decrease/ (increase) in net overdraft for the period 31 7 (12)
Net decrease in other debt 7 213 168
Exchange adjustments (17) - 2
Debt, net of cash and investments as at period end (i) (87) 174 (117)
i. Debt, net of cash and investments, as at 30 June 2001 comprised cash and
money market investments of £241 million (30 June 2000: £378 million; 31
December 2000: £214 million), less bank overdrafts and loans of £187
million (30 June 2000: £36 million; 31 December 2000: £176 million) and
finance lease obligations of £141 million (30 June 2000: £168 million; 31
December 2000: £155 million).
Notes
1. Segmental analysis
for the 6 months ended 30 June
Turnover Operating profit/ Operating profit/
(loss) before (loss) after
exceptional charges exceptional charges
and goodwill and goodwill
amortisation amortisation
2001 2000 2001 2000 2001 2000
£m £m £m £m £m £m
as restated as restated
UK
British Gas Energy 5,636 4,090 443 385 441 385
Supply
British Gas Home 339 303 11 9 7 9
Services
AA Road Services 233 226 22 18 (1) (1)
AA Financial Services 69 60 16 15 8 6
Goldfish Financial - - (22) (6) (22) (6)
Services
Telecommunications 14 - (52) (10) (52) (10)
Other Activities 30 28 (10) (7) (11) (7)
6,321 4,707 408 404 370 376
North America
Energy Supply
339 - 26 - 13 -
- continuing
93 - 3 - 1 -
-
acquisitions
432 - 29 - 14 -
Total from operations 6,753 4,707 437 404 384 376
Continuing operations 6,660 4,707 434 404 383 376
before acquisitions
Acquisitions 93 - 3 - 1 -
6,753 4,707 437 404 384 376
1 Segmental analysis - continued
for the year ended 31 December 2000
Turnover Operating profit/(loss) Operating
profit/(loss)
before exceptional after exceptional
charges
charges and goodwill and goodwill
amortisation
amortisation
2000 2000 2000
£m £m £m
as restated as restated
UK
British Gas Energy 8,390 531 530
Supply
British Gas Home 636 26 26
Services
AA Road Services 447 25 (19)
AA Financial 128 24 7
Services
Goldfish Financial - (15) (15)
Services
Telecommunications 1 (49) (49)
Other Activities 64 (24) (26)
9,666 518 454
North America 267 8 (2)
Energy Supply
Total from 9,933 526 452
operations
Notes:
'British Gas' includes all activities under the 'British Gas', 'Scottish
Gas' and 'Nwy Prydain' brands. Operating profit includes the share of
profits less losses in joint ventures and associates.
2. Costs (before exceptional charges and goodwill amortisation)
6 months 6 months Year ended
ended ended
31 December
30 June 30 June
2000
2001 2000
£m
£m £m
as restated
as restated
Cost of sales:
Continuing operations before 5,445 3,588 7,921
acquisitions
Acquisitions 79 - -
5,524 3,588 7,921
Operating costs:
Continuing operations before 794 723 1,504
acquisitions
Acquisitions 11 - -
805 723 1,504
3 Exceptional charges and goodwill amortisation
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2001 2000 2000
£m £m £m
Exceptional restructuring costs:
- continuing operations 13 3 14
Goodwill amortisation:
- continuing operations 38 25 60
- acquisitions 2 - -
40 25 60
53 28 74
4 Earnings before exceptionals and goodwill amortisation
6 months 6 months Year ended
ended ended
31 December
30 June 30 June 2000
2001 2000 £m
£m £m as restated
as restated
Profit before taxation 364 359 424
Exceptional charges and goodwill 53 28 74
amortisation
Profit before taxation, exceptionals 417 387 498
and goodwill amortisation
Taxation (80) (37) (109)
Minority interest 6 - -
Earnings before exceptionals and goodwill 343 350 389
amortisation
5. Taxation
The charge comprises mainly corporation tax on 'ring-fenced' offshore
gas production.
6. Dividends
An interim dividend of 1.2 pence per share (2000: 1.1 pence) will be paid
to shareholders on 28 November 2001. The final 2000 dividend of 1.7 pence
per share was paid in June 2001.
7. Earnings per share
Basic and adjusted earnings per share (EPS) are calculated as
follows:
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2001 2000 2000
as restated as restated
Earnings EPS Earnings EPS Earnings EPS
£m Pence £m Pence £m Pence
Profit after taxation and minority 290 7.3 322 8.1 315 7.9
interest / Basic EPS
Add back exceptional charges and 53 1.3 28 0.7 74 1.9
goodwill amortisation
Earnings before exceptional 343 8.6 350 8.8 389 9.8
charges and goodwill amortisation/
Adjusted Basic EPS
Average number of shares (million) 3,980 3,973 3,976
used in the calculation of basic
and adjusted basic earnings per
share
Average number of shares (million)
used in the calculation of diluted 4,050 4,038 4,042
earnings per share
8 Basis of preparation and accounting policy change
The unaudited financial information contained in this report does not
comprise statutory accounts within the meaning of Section 240 of the
Companies Act 1985.
These results have been prepared using accounting policies consistent
with those used in preparing the Group's 2000 Annual Report and
Accounts, except that the policy in respect of energy trading
activities has been changed to adopt mark-to-market accounting on
unrealised profits and losses.
Previously, as the market for energy trading derivatives was not fully
liquid, gains and losses relating to these energy-derivatives were
recognised in the profit and loss account when the deals were closed
out. A provision was made, however, where it was expected that a net
loss would arise on settlement of the derivative contracts.
The directors now consider that the market for energy trading
derivatives is sufficiently liquid to recognise movements in energy
prices in the profit and loss account by marking to market both energy
trading derivatives and open positions on physical energy contracts.
The impact of the change in accounting policy is set out below:
6 months 6 months Year ended
ended ended
31 December
30 June 30 June 2000
2001 2000 £m
£m £m
Within the profit and loss
account:
Cost of sales and profit for the 19 (14) (14)
financial period
Within the cash flow statement:
Operating profit after 19 (14) (14)
exceptionals
Other non cash flow items (19) 14 14
Cash inflow from - - -
operating activities
As at As at As at
30 June 30 June 31 December 2000
2001 2000 £m
£m £m
Within the balance sheet:
Debtors due within one year 19 - -
Total capital and reserves 19 - -
9 Reconciliation of operating profit to operating cash flow
6 months 6 months Year ended
ended ended
31 December
30 June 2001 30 June 2000 2000
£m £m £m
as restated as restated
Group operating profit 371 368 434
Add back:
Exceptional charges and goodwill 53 28 74
amortisation
Depreciation and amortisation 189 166 326
(Increase)/decrease in working capital (12) (132) 250
(Decrease)/increase in provisions (234) 54 55
Operating cash flow before
exceptionals:
Continuing operations before 368 484 1,139
acquisitions
Acquisitions (1) - -
Continuing operations 367 484 1,139
Expenditure relating to exceptional (30) (43) (76)
charges
Net cash inflow from operating
activities
337 441 1,063
10 Returns on investments and servicing of finance
6 months ended 6 months ended Year ended
30 June 2001 30 June 2000 31 December 2000
£m £m £m
Interest received 16 22 39
Interest paid (23) (22) (34)
Interest element of finance (8) (9) (18)
lease rental payments
(15) (9) (13)
11 Capital expenditure and financial investment
6 months ended 30 6 months ended 30 Year ended
June 2001 June 2000
31 December
£m £m 2000 £m
Purchase of tangible (78) (63) (157)
fixed assets
Sale of tangible fixed 1 11 17
assets
Purchase of own shares - (3) (23)
Loan to a joint venture (2) - (2)
(79) (55) (165)
12 Acquisition payments
6 months ended 30 6 months ended 30 Year ended 31
June 2001 June 2000 December 2000
£m £m £m
Subsidiary (41) - (516)
undertakings
Joint ventures (37) - (1)
Deferred (9) - (63)
consideration
Total cash (87) - (580)
payments
Overdraft (16) - (10)
acquired
(103) - (590)
Enquiries
For further information please contact:
Charles Naylor, Director of Corporate Affairs
Chris Milburn, Head of Investor Relations
Telephone:
01753 758 445 (Press)
01753 758 114 (Shareholders and Analysts)
Facsimile:
01753 758 440 (Press)
01753 758 472 (Shareholders and Analysts)
Internet:
www.centrica.com
www.gas.co.uk
www.goldfish.com
www.theAA.com
Financial Calendar
Ex-dividend date for 2001 interim dividend 10 October 2001
Record date for 2001 interim dividend 12 October 2001
Payment of 2001 interim dividend 28 November 2001
2001 Preliminary results announcement 21 February 2002
2001 Annual Report and Accounts published End of March 2002
Annual General Meeting 13 May 2002
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