Centrica plc

good to go good morning everybody it's brilliant to be here today and as usual i'm joined on the stage by our cfo and the new youtube sensation russell o'brien for those of you that watch this video no doubt our leadership team here in the front row and our chairman here's a number of other centrica people so 2025 is a year of significant progress building further on our journey to make centrica a stronger higher quality business building on the foundations that we've been laying for growth we're recycling capital from non-core assets investing in assets like size vlc grain lng and the meter asset provider assets that will both grow and stabilize our earnings profile eliminating downside risks we're adding long-term value and we're building future optionality 2025 showed our resilience and our further improved operational performance but it also had its challenges Conditions remain difficult for Centrica Energy throughout the year, as it did for many, many commodity traders. But I'm delighted with what the team delivered in 2025. But as always, I'm looking for more. And it's a mark of how far we've come that collectively we're not satisfied with £200 million of EBITDA from optimisation. We collectively were not satisfied with more than 11 pence EPS in a difficult year. because our expectations of what Centrica can deliver have fundamentally changed. Over the last five years we've invested £3 billion and we've returned around the same amount to shareholders including increasing the dividend by 22% this year. Balanced capital allocation reflecting our commitment to growing the business and to rewarding our owners, our shareholders. We've now bought back a quarter of the company since 2022 Thank you very much. and neither is our discipline if the projects don't stack up we won't invest and surplus capital will always come back to shareholders always we expect to invest at least another 700 million pounds this year maybe more mainly in assets that fundamentally strengthen our portfolio and we expect to continue investing at about the same rate right through to the end of this decade And that's what underpins our confidence in delivering £1.7 billion of EBITDA, or better, by the end of 2028. And it's why we can tell you that we'll continue to grow that beyond 2028 to £2 billion by 2030. Now both of these numbers include the impact of expected but not yet confirmed extensions to the four existing advanced gas-cooled nuclear power stations into the early 2030s. Two billion pounds of EBITDA in 2030 would see our EPS more than double over the next five years. But I'm never satisfied. So rest assured that my aim is to do even better than that. By focusing on value, we've made Centrica a much stronger business than it was six years ago. We're running the business as well as we possibly can. We're investing in a disciplined way. And it's the same approach that will deliver the next phase of our growth. We spoke in July about how we saw opportunities to transform Centrica. Our transformation program is going well. It's a key part of delivering our full potential. We've made progress anchored in three simple principles, all underpinned by technology. Number one, improving customer experience further. Number two, driving more commercial growth. And number three, continuing to deliver on cost efficiencies. A lot of this benefit will be in the retail business, but there's huge potential across the entire group. Last year we delivered net benefits of £100 million. And unlike other companies, we're not recording transformation costs in exceptionals. If we had done that, 2025 EPS would have been two pence higher. So another company, it would have been 13.2, not 11.2. the program will ramp up this year and we expect to take another half a billion pounds out of the cost base by the end of the decade over and above what we've already done underpinning earnings growth and helping to create new opportunities now ai is a part of that and it's a huge opportunity for us we're working with world-class partners to explore how we can further deploy technology including ai but not only ai to transform our customer service into reduced costs and I'm going to lay out some of the specific examples of that later. So with that, with the opening, I'm going to pass you over now to YouTuber and CFO, Russell O'Brien, who's going to take you through the numbers.

Thank you. Okay, thanks Chris and good morning everybody. So over the past years, we have reshaped the way we run Centrica with a focus on three business units, retail, optimization, and infrastructure. And we've taken this opportunity to simplify our reporting, aligning the segments to the way we now run the business. And we've also shifted to EBITDA as our main performance and guidance metric, which is a better measure for the business as we invest in the portfolio and grow. Now, I recognise there are a few moving pieces, so I've put a very funny video explainer on the website, as Chris is mentioning, and some other materials, just so that no one's confused by the resegmentation, and it unpacks everything in a little bit more detail. The main change is splitting Board Gosh and Centrica Business Solutions into the component parts, so Irish retail, for example, is now reported alongside the same UK activities, Irish optimisation within Centrica Energy. and we've also moved our irish power assets and our growing meter asset provider into their natural home and infrastructure so now to the numbers i'd like to highlight three key points first we've reported solid numbers overall in the context of external challenges demonstrating the resilience of our business second our progress on vesting and transformation program gives us more confidence in our medium term earnings outlook And third, our balance sheet remains strong, giving us the financial platform to execute. Adjusted EBITDA for the year was £1.4 billion, and adjusted earnings per share was just over 11 pence. we delivered operating cash flow of over 900 million pounds while we had a free cash outflow of 200 million pounds after doubling investment to 1.2 billion and after returning over a billion pounds to shareholders through the dividends and the buyback adjusted net cash closed at one and a half billion retail and optimization delivered almost 800 million pounds of ebitda with retail contributing 574 million broadly flat year on year Within that, UK Home Services delivered almost £170 million of EBITDA and the 7% top line growth reflected improvements to our commercial propositions and pricing and was supported by a razor sharp focus on costs. Margins expanded from 4.3% to 6.8% and we're pleased to have moved out into the profit range we outlined ahead of schedule and there is still much more to come. Business supply also delivered a strong result. UK home energy supply and optimisation both faced external headwinds and saw EBITDA decline. And I'll come back to both of those areas in a moment. And finally, infrastructure of £728 million of EBITDA was lower due to a combination of asset sales, realised prices and outages in Q4, offset by a lower than expected loss at rough. As usual, we can find more detail on the business performance in this morning's release. as consumer demands change competing effectively in the retail market requires efficiency innovation and resilience and we were behind the curve in many of those areas but the evidence is clear we are moving in the right direction for the first time in over a decade we grew customer numbers across all of our retail businesses simultaneously underpinned by the simplification and the use of technology this includes the migration to ignition and modernized planning systems and services unlocking commercial flexibility deeper customer insights and cost efficiencies those dynamics were key to the improvements and services retention is improving we're building new growth channels and we're managing margins effectively but as ever we're not satisfied we are still losing customers we shouldn't be losing and there's more we can do commercially We want to continue growing our retail customer base, but we won't adopt the pricing behaviour we're seeing from some of our competitors. We believe it is unsustainable. We'll remain nimble, of course, and compete hard, but our primary focus is on delivering value over volume. And with more insight, we're able to identify and focus on those customers who really want our products and services, helping them get better solutions for them and creating more value for Centrica. Home energy supply delivered a resilient performance in 2025. As expected, the market continued to pivot towards fixed price tariffs, which had a dampening effect on margins, and weather was an £80 million headwind through the year in the UK. Now, on the other side, the energy price guarantee scheme reconciliation saw us record a gain of £42 million related to revenue from prior periods that was not recorded at the time. And the results, as you've seen, benefited from other costs and revenue phasing from earlier periods. Bad debt remains a challenge, with the latest figures showing over £4 billion of debt past due across the industry. And a bad debt charge in UK home energy supply increased to around 3% of revenue. Now, we continue to advocate for Ofgem to take more proactive steps. to help those who genuinely can't pay and address those who can but choose not to but in the meantime we do not expect we do expect those additional costs we face this year to be recovered in future periods and the ups and downs reflect the essence of the uk home energy supply business short-term volatility offset by through the cycle predictability and since the price cap began in 2019 as you can see our average margin is 2.3 percent That's above the 1.9% allowed during the first four years of the cap and broadly in line with the allowance since then. Supported by the price cap mechanism, this is a business that generates solid, through the cycle, regulated earnings and cash flows. Centrica Energy posted us off the result, primarily driven by gas and power trading. Against that backdrop, we've remained focused and driving long-term value. And £200 million of EBITDA in a tough year is a big step forward from where the business was a few years ago. RETO, a renewable route to market business, again performed well. Assets under management grew by 17% to over 19 gigawatts. Centrica Energy is now consistently one of the most innovative, responsive and commercial partners to asset owners across Europe, strengthening our ability to grow more in this area. In LNG, the teams have fundamentally transformed the portfolio over the past couple of years. We are now 100% hedged until 2028 and over 80% until 2030. So we've protected any downside and retained valuable physical optionality. Now, we're not satisfied with the absolute performance in gas and power trading, but we do take comfort in strong relative performance. in really difficult markets the team generated a positive margin and remained consistently disciplined through the year consciously reducing risk rather than chasing aggressive positions is a core principle of how we operate this limits downside with returns skewed to the upside when markets allow in the short term more rational behavior is returning with gas trading recovering a little bit in the second half but events as we've all seen in the past week demonstrate the market remains very volatile and it looks like it'll take some time for them to stabilize so given all that we expect Centrica Energy to be below its sustainable EBITDA range for this year we remain confident though in the longer term outlook with earnings unsupported by expanding our geographic footprint and capabilities adding further diversification and growth options to the portfolio So, of course, the challenges we saw last year demonstrate why it's so important to continue building a predictable contracted infrastructure portfolio. And 2025 saw as more than double investment year on year, spending almost 400 million as I will see 200 million in grain and 225 million in the map, which was higher than our target. After other movements, including decommissioning and disposals, we saw free cash outflow of 167 million pounds. We returned £1.1 billion to shareholders in 2025, which means we've invested and returned £3.6 billion over the last two years. The balance sheet remains strong and we expect surplus capital to emerge over time as the business continues to perform. But, as we've demonstrated, we keep the balance sheet under close review and our commitment to maintaining that discipline is unchanged. Now to the outlook this year. alongside streamlining our segments we've simplified simplified our guidance ranges but there's no change to the underlying numbers all we've done is restate on an EBITDA basis in 2026 we expect retail to be in its EBITDA range of 500 to 800 million pounds and that's after the transformation spend in the year We currently expect optimisation EBITDA to improve somewhat relative to 25, but remain below the medium-term sustainable range at around £250 million. And assuming the second spirit energy disposal completes around the middle of the year, we see £500 to £650 million as a sensible range for infrastructure, including, importantly, about £175 million from the key regulated and contracted assets. As a reminder, earnings from the spirit disposal assets will continue to be recorded through the P&L until the transaction completes later this year. We also assume rough will be around break-even, driven by a continued focus on optimising indigenous gas sales and cost discipline. We expect investment of at least £700 million. This includes transformation, further investment into the map and our power assets, including size we'll see. today we've also laid out guidance on interest and tax to help with your modeling including a structural decline in the effective tax rate as we pivot the portfolio away from highly taxed spirit energy earnings so we're all excited about our transformation program which is accelerated over recent months and underpins our plan to deliver top-line growth while driving underlying efficiencies through the organization Our operating cost base is just under £2 billion, including bad debt and depreciation. 3% annual inflation on that is a £300 million earnings headwind by 2030. So driving cost efficiency is a huge opportunity and a necessity. And we're ramping up multiple work streams and we're already taking actions that are making a real difference, which Chris will talk about shortly. In 2025, we reduced OPEX by 3%, net of inflation and costs to achieve of £100 million. Looking forward, we aim to deliver a further half a billion pound reduction by the end of the decade. And we have around half of those savings identified already and are working hard to lock in the remainder. That means we expect our nominal cost base to remain broadly flat by 2030, with efficiencies fully absorbing inflation and the cost of supporting growth. And from what I can see today, there will probably be around £600 million of cost to deliver those benefits, around £400 million of OPEX and a further £200 million of CAPEX. And we will be as disciplined in our OPEX investment as we are deploying capital generally. The earnings benefit will come through over time. As Chris says, we'll be transparent with the costs and we don't expect exceptional charges. We want to give you the tools to assess our performance, and more importantly, we want to ensure our colleagues are fully focused on delivering value. So to summarize, Centrica's performance in 25 was resilient in the face of some external challenges. The assets we've brought into the portfolio over the past year mean we are increasingly confident of being able to maximize sustainable earnings, the foundation of our financial framework. And we're successfully balancing rewarding our shareholders with retaining the strength to support our growth ambitions. And with that, let me hand back to Chris.

Thanks Russell. The trends shaping the energy system became ever clearer in 2025. uk electricity demand grew for the second year in a row following many years of decline and intermittent generation rose to over a third of total supply now looking forward demand growth will accelerate and renewables penetration will continue to grow so will the need for zero carbon basal electricity dispatchable backup electricity generation and electricity storage to keep energy secure and affordable for the household and the businesses that will drive the economic growth the UK needs. There's a once-in-a-generation investment cycle underway to meet these growing needs. The challenges of delivering new projects are real. Planning, good connections, supply chains. None of this is easy. A couple of years ago, you could pretty much pick up a gas turbine off the shelf. Today, there's a five-year waiting list. So existing capacity will also be needed for much, much longer. And as you can see, the expected proportion of gas-fired electricity generation in the mix in 2040 has almost doubled. That creates huge opportunity for us, and it's why we believe our strategy is the right strategy. Focused on the assets that will be needed to support a fair and affordable energy transition, whilst remaining pragmatic and retaining the flexibility to adapt however the transition progresses. the right strategy is one thing but it must be coupled with the ability to deliver and that's way more than about reshaping the portfolio it's about way more than that it's about rebuilding a platform that allows us to compete in a rapidly evolving retail market and about building the capability to identify develop and operate the infrastructure assets that will define our future now we've now got the foundation and the transformation program that will help us deliver this next phase focused on the core areas that I mentioned earlier customer service commercial growth cost efficiency transforming customer service is critical to our success we've made progress improving our digital contact channels but we're consistently identifying more areas for improvement our aim is to reduce contact by at least 30% now it's not that we don't like speaking to our customers we really do is that we want to give them fewer reasons that they have to contact us we want to use technology to help us make their lives easier and to offer more relevant products and more relevant services now if we achieve that that will be a significant efficiency gain but we want even more we're also aiming for a further 40 percent of customer contact being handled through enhanced digital channels including far more use of ai to support our colleagues by ramping up the use of technology we're freeing up time to solve the thorny issues really difficult issues for customers and to drive commercial performance creating the right jobs in the right places as we grow our business we're investing in the skills and the capabilities that we need for this future rewiring how we work to sharpen accountability to grow expertise and to help us serve customers far more efficiently that extends to our central functions we've reduced headcount there already by around 5% mainly by eliminating duplicated roles following the restructure of the business and by embedding new more agile ways of working we can make our core processes much much more efficient the savings potential from this area alone is well over a hundred million pounds a year improving commercial performance is still the biggest opportunity that we've got to grow the business Russell mentioned the success we've seen in retail. There's no magic behind the improvements. They've been driven by focusing on the details of our processes, getting to the root cause of poor performance, and identifying the solutions. Take boiler installations as an example. We've seen decline in profitability there for years, which is a bit of an issue. But by working to improve each individual step in the process, for example, job pricing, scheduling, we were able to unlock a £20 million profit improvement. as a key contributor to the better performance and services last year we're already moving on to the next target areas we're implementing a combined customer lifetime value model across retail so we can identify opportunities to maximize value across the group that might mean that we trade off value in one part of the business to secure more value elsewhere we're happy to do that the overall group benefit is what matters this is only possible by having the right people in the right structure of the right data the same capabilities that are supporting our investment programme. Discipline investment is central to our progress and it's central to our future growth driven by the stronger capabilities we've built across our infrastructure businesses. Power under Dave Kirwan, gas under Martin Scargill and Spirit Energy focused now on Morecambe Net Zero. Deemed with deep technical expertise, proven operational discipline and a value focused mindset that creates broader growth options for the company. in size well c in green lng and in the map we're investing in high quality long duration regulated and contracted assets that will fundamentally reshape centrica and deliver critical national infrastructure for the uk we're doing a similar thing in ireland with our peakers now we made our initial contribution to size well c in november we've got earnings in 2025 relating to size well c and earnings will grow in a predictable way for the next 15 years We expect our share of the RAB to grow to around £8 billion by commissioning. That will be against a net equity investment of around £500 million and project financing of £5 billion. Real value creation with very, very low risk. The map is also a real success story. It's hugely outperforming our expectations, the expectations we had when we set the business up. we installed over a million metres last year which makes us the fastest growing map in the UK and we've now got more than 1.6 million metres on the wall just around two years after we set this business up the capabilities that we've built are unlocking future growth opportunities both in the UK and overseas now Dan, Gareth and the team deserve huge credit for what they've achieved but they don't get any special treatment now we've seen what they can deliver in 25 I expect even more this year We're still early in the ownership journey, for example, at grain, but the value of the asset is clear. Earnings are highly contracted. The importance of the terminal will only increase as the UK becomes ever more reliant on imported gas. And I've been delighted to see the strong alignment we've got with ECP, our partners, on the key priorities for the asset. And I'm confident we've got the right team in place to deliver on the full potential of this absolutely critical business. Now we've got to acknowledge that not everything has gone completely to plan. Commissioning, for example, of our Irish peakers has been delayed and they're now due around about the middle of this year. Now that's partly due to grid connection delays and we've secured a modification to the capacity market contract to compensate for that, mitigating the value impact. But it also reflects missteps that we've made as we build back our construction capability. we're not happy about that but we have learned valuable lessons and we're confident that will be applied to future projects we've not really built big infrastructure for over a decade we've also been proactive in managing our portfolio recycling capital from non-core assets you saw our recent disposal last month portfolio simplification has allowed us to accelerate value sharpen our strategic focus and reduce our exposure to commodity price volatility collectively the actions were taken are fundamentally reshaping our company steadily shifting our portfolio towards more regulated more contracted earnings as russell laid out home energy supply has a regulated underpin while services and b2b both generate more stable cash flows from contracted activities the trajectory in the existing infrastructure portfolio is very very clear and we've got several opportunities that could even accelerate that pivot the government consultation which will decide the path forward at rough closed yesterday And we expect a public update, hopefully later in the first half. We're optimistic about the outcome, given the critical importance of gas storage to UK's energy security, which was acknowledged both in the consultation document and by MISO recently. But we remain super focused on the value proposition. And we won't keep rough open speculatively. We need clarity to justify redevelopment. The government is also due to publish a decision on financial support for nuclear life extensions over the next few months, including the potential for a CFD at Science Wellbeing to underpin a 20 year asset life extension. These are two very clear opportunities to pivot merchant exposed assets to regulated exposure and to substantially extend asset lives. Even Centricate Energy has got an element of predictable fee based earnings. and has materially reduced the downside risk in the LNG business, way beyond I think what people appreciate. If you look further ahead, the steps we've taken to expand our organic growth pipeline, for example our partnership with ExEnergy and further development opportunities at Grain, allow us to be disciplined, to focus on the most valuable opportunities, and to adapt as the energy transition develops. Our investment focus remains the same, assets that support security of supply. assets with a regulated and contracted underpin where we can add value through optimization assets where we can bring our incredible capabilities and our extensive experience to bear now we will remain predominantly a uk and irish business for the foreseeable future but we don't restrict ourselves by geography we're focusing on areas where we have or can build a durable competitive advantage that will allow us to create more upside than if we just focus exclusively on one or two countries. So I would hope that in five years Centrica will be more geographically diverse but it will be in targeted places where we have deep market experience and insight primarily from our trading activities in Centrica Energy. That's what supported us investing in batteries in both Belgium and Sweden and it's how we can deliver future value from future opportunities. We told you in July that we're targeting above £1.6 billion of EBITDA by the end of 2028, underpinned by the Transformation Programme. That's unchanged. Within that, retail and optimisation will deliver growth, plus infrastructure pivots from merchant to regulated exposure. By 2030, we expect retail to reach around £800 million. As Russell explained, we can keep OPEX flat in nominal terms, with top-line growth flowing through to higher margins and higher earnings. That's after a couple of hundred million pounds of additional OPEX that we put in to support the growth that we see. Expanding our capabilities means that optimisation can move back towards the top of its existing range, about 400 million pounds of EBITDA, with opportunities to do much, much better in the right conditions. So that's 1.2 billion pounds of EBITDA in total. We expect infrastructure to grow to about 800 million pounds of EBITDA by 2030, and that assumes further nuclear life extensions. And almost two thirds of earnings... from regulated and contracted sources from infrastructure by that point that's up from less than 5% today far higher quality earnings if you bring that all together we've got good visibility of reaching £1.7 billion of EBITDA by the end of 2028 that's underpinned by the £4 billion investment programme we've already told you about and depending on the opportunities we may spend even more than that as long as the value is there Beyond 2020, we expect to continue investing at the same rate, around £600-800 million a year until the end of the decade, but only if we see the value. By 2030, we're aiming for EBITDA of around £2 billion, with around two-thirds of that EBITDA coming from businesses with regulated and contracted earnings. Now, of course, there's going to be a range around those numbers to reflect the near performance there always will be. but that range will tighten as we grow the share of lower volatility, more predictable, more contracted, more regulated earnings. And given the structurally lower tax rate of the new infrastructure we're building, post-tax earnings will accelerate faster than EBITDA. We're aiming to more than double our EPS in the next five years by 2030. So the picture's clear. We're building a fundamentally stronger, higher quality, more predictable Centrica. plc plc plc we've made real progress reshaping this business more regulated more contracted earnings reducing downside risks creating upside opportunities delivering against their investment program and recycling capital from non-code assets into higher quality growth opportunities at the same time the transformation program is taking hold it's supporting earnings today 100 million a benefit in 2025 and it's laying the foundations of the future now two billion pounds of ebitda by 2030 and more than doubling the EPS is ambitious, but it is very achievable. I am very confident of that. To do that, we'll continue investing. There are fantastic opportunities for us to deliver value by doing that. Super opportunities. Centrica is a far, far stronger company than it was five, six years ago. It's even a far stronger company than it was just a year ago. We've built resilience. We've diversified our earnings significantly. we've created huge optionality for the decade ahead we're really looking forward to delivering on that opportunity for our colleagues for our customers for our shareholders to creating real value so with that I'm going to stop talking with an aim of making 30 minutes I've probably gone slightly over so I apologise for that Russ and I will be delighted to take your questions and I'm sure a lot of them are going to be number questions or questions on videos that we put on this morning so with that happy to take all your questions now there's no questions on the phone from online but if you're online you can type your question in I think Fraser's going to have a speaking part later to relay those questions and we trust Fraser that they're not his questions