TIDMCNA
RNS Number : 5041I
Centrica PLC
02 April 2020
2 April 2020
Centrica plc
("the Company")
Trading Update
Summary
-- Priority during the Covid-19 pandemic is to look after the
health and safety of our employees and our customers.
-- The Company is committed to helping all the communities it
serves through the pandemic, ensuring continued access to heating,
hot water and power for all its customers and providing additional
support where needed for vulnerable customers.
-- The Board remains committed to taking appropriate actions to
maintain a strong balance sheet.
-- Substantial liquidity available to accommodate anticipated
increase in working capital arising from certain customer segments
deferring payments.
-- Financial impacts of Covid-19 and related economic weakness
difficult to quantify precisely at this stage.
-- Identified actions to reduce 2020 cash expenditure by around
GBP400m compared to previous plans, including reductions in
non-essential operating costs and the delay of capital and
restructuring projects, to provide flexibility to navigate the
impacts of the pandemic.
-- Following the decision not to pay any Board level bonuses
relating to 2019, bonus payments to all other management have also
been paused and will be reviewed when the financial impacts become
clearer.
-- Taken the prudent decision to cancel the proposed 2019 final
dividend payment of 3.5 pence per share.
-- Spirit Energy divestment process paused until financial and commodity markets have settled.
Chris O'Shea, Interim Group Chief Executive
"As the scale and length of the crisis unfolds, it is becoming
increasingly clear what a vital role so many of the Centrica team
perform to keep our communities warm, safe and supplied with
energy. I am extremely proud and humbled by the response of
colleagues, and on behalf of the Board I would like to say how
grateful we are to them. While there are so many uncertainties
surrounding the impacts of this situation, I am confident that we
have acted promptly and prudently to underpin the long term
strength of Centrica."
Operational update
Our first priority during the Covid-19 pandemic is to look after
the health and safety of our colleagues and customers while
contributing to the efforts of our various host governments to
ensure the countries in which we operate continue to have access to
energy and essential services. We are following all advice from
government and relevant health organisations, and as a consequence
we have stopped all non-essential customer visits to minimise
contact. However, our service engineers will continue to attend
breakdowns, and across the business we will remain available to all
our customers, whilst prioritising those who are vulnerable and may
need additional support over the coming weeks.
We have several hundred UK service engineers who have
volunteered to perform essential service visits to customers' homes
even where there may be higher risk of Covid-19, to ensure they
have continued access to heat, hot water and electricity. And all
colleagues across the organisation are showing incredible
commitment and dedication, as we continue to provide an essential
service to our customers in all our markets, ensuring continuity of
the supply of gas and electricity and the provision of essential
energy services to homes and businesses.
Impacts of Covid-19 on our customer-facing businesses
In our customer-facing businesses, although we are starting to
see increased energy demand from residential customers as more
people work from home, we are seeing a more significant reduction
in demand from business customers as sites temporarily close. We
also expect to see an increase in working capital outflows and
customer bad debt, as certain customer segments defer payments due
to the reduction of household incomes and business revenues. In
addition, we are likely to see an impact on revenues from our
services and solutions activities for both homes and businesses, as
we prioritise only essential work in the near term and given the
uncertain economic outlook.
The impact that reduced energy demand and weaker economic
conditions will have on our 2020 AOCF and adjusted earnings is
difficult to quantify precisely at this time, given it is unclear
how long the current situation will last, how customer behaviour
may change, the impact on the wider economy, and the extent to
which government financial support for households and businesses
may help mitigate some of the expected effects. Therefore, we feel
it is prudent to withdraw our 2020 Group AOCF guidance at this
stage.
Targeting the Upstream division to be free cash flow neutral in
2020
In our Upstream division, consistent with the rules of thumb
provided by the Company, the reduction in Brent Oil prices since
the Preliminary Results on 13 February is forecast to negatively
impact Exploration & Production AOCF in 2020 by around GBP100m.
In addition, we have seen further outages at the Dungeness B and
Hinkley Point B nuclear power stations.
In response, we have already taken actions to reduce 2020 cash
capital expenditure by around GBP100m to around GBP400m in Spirit
Energy and identified further cost savings. As a result, we are
still targeting our Upstream division to be no worse than free cash
flow neutral in 2020.
The current environment also makes it more challenging to
execute on the planned divestments of our interests in Spirit
Energy and our interest in Nuclear. We were due to receive initial
bids for Spirit Energy around the end of March, however we have
taken the decision to pause the process until financial and
commodity markets have settled. We continue to pursue the
divestment of both assets and our intention remains to exit oil and
gas production and nuclear power generation in line with our
strategic shift towards the customer.
Mitigating actions
The Company has significant flexibility in its cash flows, and
in addition to the actions taken in the Upstream division, the
Company is taking steps to reduce cash expenditure in the
customer-facing divisions. These include reducing non-essential
operating costs, deferring the decision to pay employee cash
bonuses relating to 2019 until the outlook is clearer, implementing
a pay freeze for most non-customer facing colleagues, and delaying
over GBP100m of restructuring spend. The Board also took the
decision earlier this year to award no bonuses to Executive
Directors relating to 2019.
The Company has also stopped or delayed all new non-critical
capital expenditure projects in its customer-facing divisions,
which is expected to result in a reduction in cash expenditure of
around GBP100m in 2020. This means total Group capital expenditure
including E&P is now expected to be around GBP600m compared to
around GBP800m at the time of the Preliminary Results. We are also
engaged in constructive discussions with relevant governments and
regulatory authorities to help ensure that appropriate protections
are put in place for both the industry and customers during the
pandemic.
In addition, the Board has taken the prudent decision to cancel
the 2019 final dividend payment of 3.5p per share, due to be paid
in June 2020. The total cash outflow from the 2019 final dividend
was expected to be GBP204m.
Balance sheet and liquidity position
The Board remains committed to maintaining a strong balance
sheet. Moody's confirmed a Baa2 (stable) credit rating on 13 March
and S&P confirmed a BBB (stable) credit rating on 31 March. As
at the end of March, the Company had GBP0.6bn of available cash and
cash equivalents (net of bank overdrafts) and GBP2.7bn of undrawn
credit facilities. There are no material covenants on any of our
existing debt.
Annual General Meeting
The evolving Covid-19 situation and the related government
restrictions will clearly impact the ability of shareholders to
attend our AGM this year. In normal circumstances, our AGM is well
attended but following the UK Government's introduction of measures
that require UK nationals to remain at home except in specific
circumstances (which do not include attending an AGM), it will not
be possible to hold the AGM as intended on 11 May. The health and
safety of our shareholders and colleagues is always our utmost
priority and as a consequence, the AGM will be held as a closed
meeting and shareholders will not be able to attend in person. The
format of the AGM this year will be purely functional to comply
with the relevant legal requirements. Although shareholders will
not be able to attend in person this year, shareholders' views
remain important to us. Therefore, all shareholders are encouraged
to exercise their votes by submitting their proxy forms either
electronically or by post. We will provide further updates in
relation to our AGM, including confirmation of the meeting date and
arrangements, on our website.
The information communicated in this announcement is inside
information.
Enquiries
Centrica Investor Relations: +44 (0)1753 494900
Centrica Media Relations: +44 (0)1784 843000
Centrica plc is listed on the London Stock Exchange (CNA)
Registered Office: Millstream, Maidenhead Road, Windsor,
Berkshire SL4 5GD
Registered in England & Wales number: 3033654
Legal Entity Identifier number: E26EDV109X6EEPBKVH76
ISIN number: GB00B033F229
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTDZGGDMMLGGZZ
(END) Dow Jones Newswires
April 02, 2020 02:00 ET (06:00 GMT)
Centrica (LSE:CNA)
Historical Stock Chart
From Apr 2024 to May 2024
Centrica (LSE:CNA)
Historical Stock Chart
From May 2023 to May 2024