The Lemon Fool

Centrica plc has agreed to sell its 382 MW King's Lynn combined cycle gas turbine (CCGT) power station to RWE Generation for £105 million, based on a valuation date of 31 December 2019. The transaction is expected to complete in the first quarter of 2020.

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 £400m 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.

Coronavirus is causing Centrica some significant disruption. Business energy demand has fallen, but there are signs working from home is increasing residential usage. The oil price crash has impacted the upstream oil & gas operations and the group's seen further outages at its nuclear power stations.

In light of the disruption, Centrica has cancelled the final dividend of 3.5p per share.

The shares fell 3.5% in early trading.

Centrica plc has today announced plans for a significant restructure designed to create a simpler, leaner Group focused on delivering for our customers.

The company will have fewer customer-facing business units all of which will report directly to the CEO. Three management layers will be removed to create a flatter, less bureaucratic organisation which is closer to, and focused on, the customer. As a result of these changes, around half of the current 40 strong Senior Leadership Team will leave the group by the end of August.

The revised operating model is expected to accelerate the delivery of targeted cost savings and lead to a reduction of around 5,000 roles across the Group, with over half of the departures expected to come from management layers. The majority of the restructuring is expected to take place in the second half of 2020, following consultation on the proposals with our colleagues.

In addition to the proposed new organisational design, the company will today start consultation to simplify terms and conditions for employees in the UK. Centrica has over 80 different employee contracts, each with multiple variants, with many of the agreements dating back over 35 years. We need to modernise these to enable us to best serve the changing expectations of today's customers while retaining the quality of our services.

Centrica plc, through its British Gas business, has agreed to acquire the energy supply customers of Robin Hood Energy Limited for an undisclosed sum.

Robin Hood Energy currently serves around 112,000 residential customers, and 2,600 business customers across 10,000 sites. Completion of the transaction is expected on 16 September with customers moving to British Gas over the next few months.

In the coming weeks, Robin Hood Energy customers will be given information on the process of moving and will be offered a British Gas tariff at the same or lower price to the one they are currently on. They will also be provided with additional information on other services they will have access to such as British Gas Rewards and offers on Homecare and Hive products.

Resilient financial performance in the second half of 2020

Centrica's operational and financial performance was resilient in the second half of 2020, as we maintained a tight focus on cash generation and expenditure against the backdrop of Covid-19. The significant restructure announced in June remains on track, and trading and optimisation performance continued to be strong, in particular in our LNG business. At the end of 2020 we had 6.9m UK energy supply customers and 3.6m UK services customers, both broadly unchanged since the half year.

Covid-19 continued to impact financial performance, although as expected the gross impact was lower in H2 2020 than in H1 2020. UK business electricity demand was negatively impacted by around 15% in H2 2020 compared to around 30% in Q2 2020. Residential boiler installations recovered in the second half compared to the first half but were still around 15% lower than in H2 2019. Cash collection trends across the Group were broadly in line with previous years.

However, we remain cautious as we head into 2021, with the return of tighter Covid-19 restrictions in the UK and Ireland expected to put continued pressure on business energy demand and limit services workload. In addition, the related uncertain economic backdrop increases the potential for additional working capital outflow and higher bad debts.

We currently expect to report 2020 full year adjusted earnings per share from continuing and discontinued operations1 ahead of current market consensus2. 2020 closing Group net debt is expected to be approximately £2.8bn, a reduction of over 10% in the year. This is before including net proceeds of £2.7bn from the sale of Direct Energy (which closed on 5 January 2021), the bulk of which will be used to reduce net debt and make a contribution to the Group's defined benefit pension schemes.

The Company is due to release its 2020 Preliminary Results on 25 February 2021.

In advance of Centrica's Annual General Meeting at 11am BST today, the Company is providing an update on its performance and progress.

Chris O'Shea, Group Chief Executive:

"As expected, trading conditions have remained tough in the year to date. However, the modernisation of our Group remains on track and the difficult, but necessary process to move colleagues onto new terms and conditions is now complete. We are pleased that 98% of UK colleagues have accepted the new contracts which will enable us to better serve the needs of our customers. Although the external environment remains uncertain, our tight focus on cash and on fixing the basics across the Group leaves us well placed as we continue the turnaround of our company."

The factors impacting our 2021 outlook remain broadly unchanged since the time of the Preliminary Results in February. Some updates on performance and progress are provided below:

· Our significant Group restructure is on track and we continue to expect year-on-year operating cost savings of more than £100m in 2021.

· As expected, Covid-19 continues to impact the Company. In Q1 2021, electricity demand from our UK business customers was negatively impacted by around 15%, residential boiler installations were down 11% compared to Q1 2020, and non-essential service visits were postponed in order to protect colleagues and customers from the risks of catching and spreading Covid-19.

· Bord Gáis Energy's Whitegate power station is now expected to return to service around the end of this year.

· Group net debt including margin cash at the end of Q1 2021 was £0.5bn, down from £3.0bn at the start of the year, including the impact of net proceeds from the sale of Direct Energy.

Given the ongoing uncertain outlook, we are still not providing any specific Group earnings or cash flow guidance for 2021. The Company is due to release its 2021 Interim Results on 22 July 2021.

monabri wrote:I think they need to provide guidance and soon!

Dod101 wrote:I cannot understand why anyone would hold it by now and why we give it any space.

Dod

monabri wrote:

Dod101 wrote:I cannot understand why anyone would hold it by now and why we give it any space.

Dod

I wouldn't suggest CNA as a new buy but I wouldn't rule it out for a recovery ( a contrarian view ). So, I'd be tempted to put one's Doris hat on. The company management needs a good kick up the derriere and a focus on customer service.

Dod101 wrote:I cannot understand why anyone would hold it by now and why we give it any space.

Dod

zharrt wrote:I still hold it, only reason I do is because I bought it at ~230p so the loss has already happened, if it goes bankrupt (which i doubt given its a supplier of last resort) I don't lose anymore than what I have done already, if it recovers even if it takes 20 years I might be able to get something back.

BBLSP1 wrote:

zharrt wrote:I still hold it, only reason I do is because I bought it at ~230p so the loss has already happened, if it goes bankrupt (which i doubt given its a supplier of last resort) I don't lose anymore than what I have done already, if it recovers even if it takes 20 years I might be able to get something back.

But you don't need to get it back the same way that you lost it!

You could sell up and invest in another share that is going to perform better. This by way of advice, as much to myself as anybody, because I too still have some CNA which I really should look to re-deploy somewhere better.