14th Dec 2007 07:00
CENTRICA FULL YEAR 2007 TRADING UPDATE Centrica plc has today issued the following trading statement ahead of enteringclose period on 1 January 2008. Overall the company has performed well in 2007 although market conditions havebecome more challenging in recent months as wholesale gas prices have risen.This has altered the mix of the Group's profits significantly, leavingunderlying pre-tax results* in line with expectations but with a slightlyincreased effective tax rate. British Gas Residential has continued to add customers in the second half,regaining the number lost in the first quarter, and we now once again serve 16.0million customer accounts. This is partly due to the lead British Gas took inlowering retail tariffs twice in March and April 2007 and partly to theimproving customer service. Although we have made substantial progress here,improving customer service further remains a key priority. We remain on track toachieve our cost reduction targets. The higher wholesale gas prices have reduced margins for gas and power sales inthe UK residential market. Nevertheless, we still expect British Gas Residentialto be profitable in the second half of this year, with full year margins stillabove the long run expectations due to the strong first half. Looking forward,the high wholesale prices will, if sustained, create a more difficultenvironment for retail energy suppliers in the UK going into 2008. We willcontinue to monitor this with regard to future pricing policy. In Centrica Energy the high wholesale energy prices in the second half haveresulted in increased gas and oil production volumes and we currently expect thetotal 2007 hydrocarbon production levels to be slightly ahead of 2006. Incontrast, although the legacy Industrial and Commercial gas supply contracts areexpected overall to make a small positive contribution in the second half, theymoved back into a loss position in the fourth quarter due to the higher gasprice and, at current forward prices, would be increasingly loss-making in 2008.The power generation segment is expected to be around break even in the secondhalf, with the result impacted by lower realised spark spreads and higher levelsof plant outages. The rest of the Group has continued to perform well. Both British Gas Servicesand British Gas Business have had a strong second half and are forecast todeliver full year operating profit ahead of expectations. The North Americanbusiness is expected to be marginally ahead of the 2006 full year result,despite the negative impact of foreign exchange translation. Underlying interest charges in the second half are below expectations. However,the results will also include the impact of prepaying the finance lease on theHumber power station, which will simplify the Group's debt structure, as well asgenerating a positive net present value and earnings impact over the remaininglife of the plant. Although this has no material impact on the level of netdebt, it will result in a one-off additional interest charge of around £40million and, as a result, will reduce earnings per share* by 0.6 pence. Excluding the impact of the Humber lease prepayment, the Group's 2007 pre-taxresults* are in line with expectations, with the reduction in UK residentialmargins in the second half of the year offset by the stronger performance fromCentrica Energy and the lower underlying interest charge. However, the shift inprofits from downstream to the more highly taxed upstream is expected toincrease the Group's 2007 tax rate from current market forecasts to just under40%. The Company will announce its 2007 full year results on 21 February 2008. Enquiries:Centrica Investor Relations 01753 494900 Centrica Media Relations 0845 072 8001 * including joint ventures and associates stated net of interest and taxation,and before exceptional items and certain re-measurements and, for underlyingpre-tax results excluding the one-off impact of the Humber lease prepayment Copyright Business Wire 2007Related Shares:
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