Centrica Group Chief Executive Officer Iain Conn To Step Down

Centrica Reports Increased Profit, Customer Count (Including Texas) In North America Home Energy Supply Business

"Refocusing" Home Solutions Business

Dividend Cut

July 30, 2019

Email This Story
Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The following story is brought free of charge to readers by EC Infosystems, the exclusive EDI provider of EnergyChoiceMatters.com

Centrica plc announced that Iain Conn, Group Chief Executive Officer, has agreed with the Board that he will step down as CEO and retire from the Board next year.

"Iain will continue as CEO to drive the repositioning of the company’s portfolio and improve underlying performance as it continues to gain momentum. We anticipate that he will remain with the Company at least until the 2020 Annual General Meeting and provide his full support to help with the transition. The Board will plan succession accordingly and provide updates in due course," Centrica said

"Iain has now agreed with the Board that, while he will continue to focus on driving this transformation, including pursuing the announced divestments and continuing to drive performance and efficiency, he will also support an orderly succession before stepping down in due course," Charles Berry, Chairman of Centrica, said

The announcement was made as Centrica reported interim results for the first half of 2019. "Centrica faced an exceptionally challenging environment in the first half of 2019, which impacted earnings and cash flows," the company said

Centrica's North American Home Energy Supply segment did report a 3% increase in adjusted operating profit for the first half of 2019, at $103 million, up from $100 million a year ago, largely due to cost efficiency delivery

In aggregate, Centrica's North American Home segment (energy supply and services) saw a 6% decrease in adjusted gross margin, at $398 million for the first half of 2019, versus $423 million a year ago

North America Home energy supply accounts increased by 143,000 from December 31, 2018, as Centrica, "won some profitable aggregation auctions in the US North East and delivered an increase in sales to higher value customers on fixed price contracts."

A breakdown of North America Home Energy Supply accounts by region is below:

Centrica
North America Home Energy Supply
Customers (In Thousands)

As of     6/30/18   12/31/18   6/30/19
Texas       640       628        643
Northeast   975     1,010      1,143
Canada      922       907        902
Total     2,537     2,545      2,688

The net growth of 143,000 customers from December 31, 2018 to June 30, 2019 in the North America Home Energy Supply segment compares to net growth of 8,000 customers from June 30, 2018 to December 31, 2018, and a net loss of 33,000 customer accounts from December 31, 2017 to June 30, 2018

In Centrica's North America Business (C&I) segment, adjusted operating profit was $(19) million for the first half of 2019, versus $69 million a year ago. Centrica's North America Business segment reported adjusted gross margin of $200 million for the first half of 2019, versus $296 million a year ago.

Centrica said that the North America Business segment results were negatively impacted by reduced opportunities for gas optimization due to warm weather and reduced commodity volatility

"The change in year-on-year profit is predominantly due to warmer weather limiting wholesale price volatility in the Eastern U.S., resulting in significantly reduced gas optimisation opportunities. This compares to strong performance in H1 2018 during spells of extreme cold weather," Centrica said

The North America Business (C&I) segment's customer count stood at 495,000 as of June 30, 2019, versus 505,000 as of December 31, 2018, and 538,000 a year ago

"North America Business customer accounts were slightly down, with our focus on higher value, higher consuming customers," Centrica said

North America C&I supply business electric volumes were 39,681 GWh for the first half of 2019, versus 41,235 GWh a year ago. North America C&I supply business natural gas volumes were 4,215 mmth for the first half of 2019, up from 3,613 mmth a year ago, reflecting the full impact from previously reported bolt-on acquisitions which occurred in 2018.

Concerning the North America Business (C&) segment, Centrica said, "In North America specifically, following a review of our business energy supply and optimisation activity in the region, we are making structural interventions to improve average returns. The priority is to improve returns and lower the volatility of those returns, before looking to enable further growth,"

Concerning the company's strategy, Centrica said that it continues to expect to meet all of its 2019 Group targets provided at the 2018 Preliminary Results, as detailed below:

• Adjusted operating cash flow is still expected to be in the £1.8bn-£2.0bn range, albeit in the lower half of the range, including around £200m of structural reduction in working capital.

• Efficiency savings of £250m.

• A like-for-like employee reduction of 1,500-2,000.

• Group capital investment will be limited to £0.9bn, below the original £1bn target.

• Non-core divestments of £500m.

• Net debt expected to be in a £3.0bn-£3.5bn range in 2019, including the impact of IFRS 16 adoption. Financial performance for the balance of year remains subject to the usual variables of weather patterns, commodity prices, operational performance and regulatory change.

Centrica said that it would be "refocusing" its Home Solutions business

"Our Connected Home business has been successful in delivering material growth in the UK, due to the scale of our customer base, sales channel synergies with energy and services, and the use of our in-home servicing capabilities to fulfil installation of products. As a result, we have developed a strong position in the UK, with leading brand awareness, a high NPS, a reliable and scalable IT platform and a wide range of products that are synergistic with our energy and services offers. We have also experienced a positive impact on the retention rates for energy and services customers," the company said

"However, we have not achieved expectations for growth in other geographies due to the absence of a number of these factors," the company said

"Having reviewed the key success factors for growth, Connected Home will now be focused on the UK and Ireland, with the business unit renamed Centrica Home Solutions. We will continue to leverage our distinctive field force for new propositions, which will be focused around Home Energy Management and Home Remote Diagnostics and Monitoring, enabling customers to lower their carbon footprint. With lower costs and reduced investment requirements, Centrica Home Solutions is targeting breakeven at an EBITDA level in 2021 and revenue of around £150m-£200m by 2022. We will also continue to evaluate joint ventures and partnerships in Home Solutions, if they unlock further value from the platform and capabilities we have created to date," the company said

"A focus for Centrica going forward will be on the future of Home Energy Management and Mobility Solutions, including the integration of Electric Vehicles into propositions for both homes and businesses. Consumers and Businesses are approaching us to help them with solutions around electric vehicles and we are developing propositions and technologies for both consumers and business customers, integrated into their energy systems," Centrica said

"In Electric Vehicle solutions, the focus has been on energy system requirements for electric vehicle integration, electric vehicle energy tariffs, electric vehicle optimisation software and after-market services. In July 2019, we announced that under a planned partnership, Ford will work exclusively with Centrica to deliver a dedicated home charging installation service and electric vehicle tariffs from British Gas and Bord Gáis Energy. Centrica will also make its installation service available to support hundreds of Ford dealerships across the UK and Ireland. Centrica is also continuing to work with other car manufacturers to support their customers and dealership networks on EV readiness, providing a one stop shop for charging solutions including charger infrastructure, energy management, financing, and optimisation. Integration of electric vehicles into the home and control of all energy management requirements of the home will be an important growth area for Centrica, and we are also working on a potential platform, using our ownership interests in individual technology platforms, to enable this," Centrica said

Centrica today announced its intention to exit oil and gas production. Alongside the intended disposal of its Nuclear investment, "this will complete its shift towards the customer and allow the Company to focus on its strengths, with an emphasis on helping our customers transition to a lower carbon future," Centrica said

Centrica also announced a dividend cut, stating, "2019 full year expected dividend rebased to 5.0p per share reflecting changed circumstances, including the UK default tariff price cap, and additional pension deficit contributions and restructuring charges."

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Corporate Counsel - Retail Supplier
• NEW! -- Senior Counsel - Regulatory - Retail Supplier
• NEW! -- Sales Representative -- Retail Supplier
• NEW! -- Energy Contracts Counsel -- Retail Supplier
• NEW! -- Senior Natural Gas Energy Trader -- Retail Supplier
• Operations Manager -- Retail Supplier
• Quality Assurance and Customer Service Manager -- Retail Supplier