TIDMCNA
RNS Number : 9317J
Centrica PLC
05 April 2018
5 April 2018
Centrica plc (the Company)
Annual Report and Accounts 2017
Further to the release of the Company's preliminary results
announcement on 22 February 2018, the Company announces that it has
today published its Annual Report and Accounts 2017 (Annual Report
2017).
The Company also announces that today, 5 April 2018, it posted
to shareholders the Notice of Annual General Meeting to be held at
2.00pm on Monday 14 May 2018 at the QEII Centre, Broad Sanctuary,
Westminster, London SW1P 3EE.
In accordance with Listing Rule 9.6.1, copies of the following
documents have been submitted to the UK Listing Authority and will
shortly be available for inspection from the National Storage
Mechanism at www.morningstar.co.uk/uk/NSM:
- Annual Report 2017;
- Annual Review 2017;
- Notice of Annual General Meeting 2018; and
- Proxy Form for the 2018 Annual General Meeting.
The above documents are also available at www.centrica.com/ar17
and www.centrica.com/agm18
This information should be read in conjunction with the
Company's preliminary results announcement. A condensed set of the
Company's financial statements and information on important events
that have occurred during the financial year and their impact on
the financial statements, were included in the preliminary results
announcement released on 22 February 2018. That information,
together with the information set out below, which is extracted
from the Annual Report 2017, is provided in accordance with the
Disclosure and Transparency Rule (DTR) 6.3.5R, which requires it to
be communicated to the media in full unedited text through a
Regulatory Information Service. This announcement is not a
substitute for reading the full Annual Report 2017. Page and note
references in the text below refer to page numbers and note numbers
in the Annual Report 2017.
Our Principal Risks and Uncertainties
Understanding those Risks that impact our Strategy
The fundamental trends outlined in our strategy on pages 10 and
11, including the decentralisation of energy systems, shift of
power to consumers and increasing digitisation, present both
opportunities and threats. Identifying and managing these risks is
critical to delivering our strategy. The Group Priorities, as laid
out below, are the lens through which we assess our risks and drive
discussions around the level of risk we need to take and the
requirements of our System of Risk Management and Internal
Control.
Strengthening our System of Risk Management and Internal
Control
Following our Strategic Review in 2015, we refreshed our
approach to risk
management. In 2017 we focused on embedding this improved
process aligned with the new operating model to ensure it makes a
positive contribution to effective decision-making and business
growth, while ensuring we successfully manage risks. In particular,
as we have moved into new geographies, we have sought to ensure we
are addressing risks associated with operating in those
jurisdictions.
Each business unit and Group function is responsible for
identifying and assessing its significant risks within the context
of our Principal Risks. For each risk, they consider both the
potential impact to the Group and the likelihood of occurrence on
an inherent and residual basis. The Executive Committee then
considers these perspectives alongside broader external and
internal factors to create a Group-wide set of prioritised
risks.
-- We categorise our risks as:
- Risk Requiring Standards (RRS):
Risk with negative impacts that we control through Standards and
Management Systems, for example process safety or data
security.
- Risk Requiring Judgement (RRJ): Risk that we choose to take in
order to execute our business strategy, for example new products or
business improvement opportunities.
- External Risk: Risk that requires a focus on scenario and
contingency planning with little or no ability to reduce
likelihood, for example extreme weather or geopolitical
turbulence.
On an annual basis, we evaluate our System of Risk Management
and Internal Control, learning from any control incidents that have
arisen, to ensure we are mitigating risks in line with our risk
appetite.
Determining the risk we would like to take
The Board approves statements of risk appetite associated with
each Group Priority. These statements provide a framework to guide
our risk mitigation activities and to drive the appropriate level
of risk taking:
-- Safety, compliance and conduct: Our appetite for taking risk
in this area is as low as reasonably practicable in relation to:
ensuring the safety of our people, customers and communities;
conducting our business operations in compliance with laws and
regulations; and managing our financial reporting risks.
-- Customer satisfaction and operational excellence: We have a
moderate risk appetite to allow us to pursue innovative
opportunities. We are driven to satisfy the changing needs of our
customers.
-- Cash flow growth and strategic momentum: We have a moderate to high risk appetite for seeking opportunities to deliver cash flow growth and our target return on capital.
-- Cost efficiency and simplification: We have a low risk
appetite for failing to implement and manage improvements
sustainably and in a rigorous and systematic way.
-- People and building capability: We accept a moderate level of
risk in finding ways to attract, develop and reward people with the
diverse capabilities needed to deliver our ambitions. However, we
have a low risk appetite for rewarding and retaining people who
fail to demonstrate our Values.
Evaluating Risks through our Enterprise Risk Framework
Our Enterprise Risk Framework is designed to enable us to
identify, evaluate and mitigate our risks appropriately. It
comprises of six steps:
1. Identify
-- Identify significant risks to achieving business unit and/or function objectives
2. Assess & Analyse
-- Assess inherent impact and likelihood using Centrica risk assessment matrix
-- Identify risk type (RRS, RRJ or External Risk) and determine target risk rating
-- Identify mitigating activity and key risk indicators and assess current risk exposure
3. Design & Implement Controls
-- Design and implement controls and actions to mitigate the
potential impact and likelihood of risks
4. Manage & Monitor
-- Management of risks and controls to deliver target risk level
-- Monitor through inspection, performance reviews and regular reporting
-- Identify and implement specific remediation actions
5. Calibrate & Assure
-- Group Functions calibrate submitted risks to ensure
consistency and prioritise their responses
-- Functional assurance and internal audit activity
-- Assess impact of assurance findings
6. Report, Evaluate & Improve
-- Report consolidated risk, assurance and control position to
the Group Risk, Assurance and Control Committee, Audit Committee
and Safety, Health, Environment, Security and Ethics Committee
-- Evaluate priority risks within the Group risk profile to identify any corrective actions
-- Evaluate Group-wide severe, but plausible risks and implications
-- Drive continuous improvement through reviewing the Risk Universe and Group risk appetite
Mitigating risks through the System of Risk Management and
Internal Control
Risk management is a key pillar of the overall governance and
management framework for the Group. Our system of Risk Management
and Internal Control comprises the following elements that are
assessed annually for effectiveness:
-- What we stand for:
- Our Purpose: We are an energy and services company. Everything
we do is focused on satisfying the changing needs of our
customers.
- Our Values: The new values were rolled out globally in
September 2017 to underpin our strategy and Priorities.
- Our Code: This was launched in early 2018 to replace our
Business Principles and provides the foundation for how we
operate.
-- Our strategic framework:
- Strategy: Set out in July 2015 and aligned throughout the
organization by the five Group Priorities.
- Financial framework: Sets out parameters and targets within
which we operate to guide our strategic planning and financial
decision making.
- Enterprise risk framework: Incorporates the Principal Risks
within the Group Risk Universe, as outlined on pages 55 to 60.
-- Our governance:
- Board and committees: Structured to effectively dispense with
required duties and through which our Principal Risks are
monitored.
- Legal entities: Subsidiary company legal entities with Boards
of Directors required to meet legal and regulatory obligations.
- Delegations of authority: Accountability is delegated through
the organisation to individuals in accordance with risk
appetite.
- Executive and committees: Oversight to ensure appropriate
planning and performance management.
-- How we are organised and managed:
- Management systems: The detailed policies, standards and
processes establishing the mandatory requirements and which are
required for the systematic management of related risks.
-- How we provide assurance:
- Functional assurance: Ensuring policies and standards are
complied with through monitoring and testing activities performed
by individuals who are not directly responsible for the operation
of the controls.
- Internal Audit: Providing confidence to the Board, via the
Audit Committee, that Centrica has appropriate risk management
procedures and effective controls in place.
- External assurance: Auditing of the Group's Annual Report and
Accounts prior to reporting, which includes assessment of internal
controls relevant to financial reporting.
Principal Risks
The Group Risk Universe is made up of a holistic framework of
Principal Risks, laid out below. The Board makes a robust
assessment of these Principal Risks, considering future performance
and our ability to deliver the strategy, including solvency and
liquidity risks. For each Principal Risk, we discuss the nature of
the risk, the risk climate and the impact on our Group Priorities.
Each Principal Risk is overseen directly by the Board or one of its
Committees, with the Board retaining overall responsibility for
risk across the Group.
Description Potential Mitigation
impacts
--- ---------------------- ---------------------- -----------------------------------------------------------------
1 Political Changes in
and Regulatory government * We are active in contributing our views on the
Intervention and regulatory development of the markets in which we operate and in
Risk of political oversight, discussions with political parties, regulatory
or regulatory specifically authorities and other influencers.
intervention relating to
such as the the Consumer
adoption Divisions * We are committed to an open, transparent and
of blanket markets in competitive UK energy market that provides choice for
price caps the UK and consumers. In November, we announced seven unilateral
in the UK North America, steps we would take and recommended a series of
energy supply such as the broader market reforms (as detailed on page 18).
market, changes developments
to the political in UK market
or regulatory regulation * The UK is due to exit the European Union within two
landscape, during 2017, years of Article 50 being triggered in March 2017. We
or failure could erode have a dedicated Brexit project group which is
to influence our profit working to understand and assess the many
that change. margins through Brexit-related issues which could impact the Group
External price caps, and our customers.
Risk or through
Governance additional
oversight: obligations * We accept that we may be the subject of regulatory
Board that increase scrutiny that could result in stakeholder concerns.
Risk Climate: operating We co-operate fully with any enquiry or investigation
Increased costs. The and take measures to react as quickly as possible.
Priority: UK's decision
Cash flow to exit the
growth and European Union
strategic and wider
momentum political
changes in
the markets
we operate
in present
risks relating
to changing
policies in
relation to
the energy
market change
and carbon
emissions.
--- ---------------------- ---------------------- -----------------------------------------------------------------
2 Financial Our exposure
Market to adverse * We have hedging strategies in place to mitigate
Risk of financial price movements exposure to
loss due in commodity
to our exposure markets, due
to market to our large commodity and financial
movements, upstream and market volatility.
including downstream * Financial risk is reviewed regularly by the Group
commodity positions, Finance Function and the Group Risk Assurance and
prices and could impact Control
volumes, profitability
inflation, and cash flow
interest generation Committee to assess
rates and across the financial exposures
currency business. and compliance with
fluctuations. Financial risk limits. Regular
External market risk review is also undertaken
Risk with is taken on by the Audit Committee.
elements by Energy * As we move into new trading arrangements, including
that are Marketing the continued expansion of our LNG business, we are
Risks Requiring & Trading focused on ensuring that our financial risk policies
Judgement (EM&T) as remain appropriate to the risks we face.
Governance part of the
oversight: proprietary
Board and trading business. * Our business units have risk measures, policies and
Audit Committee Increased monitoring commensurate with the activities and risks
Risk climate: volatility that they manage, and we invest in our systems to
at a similar in commodity further automate our control environment.
level prices could
Priority: provide more
Cash flow opportunities
growth and but also give
strategic rise to higher
momentum collateral
costs and/or
additional
credit risk
for both EM&T
and
North America
Business.
--- ---------------------- ---------------------- -----------------------------------------------------------------
3 Health, Safety, Our operations
Environment have the potential * We undertake regular reviews and have assurance
and Security to result processes in place with reporting to the HSES
(HSES) in personal Subcommittee on a quarterly basis and full discussion
Risk of failure or environmental of all issues arising.
to protect harm, or operational
the health, loss. Significant
safety and HSES events * The HSES management system is used to manage our
security could also controls, focusing on areas of concern including
of customers, have regulatory, process safety, driving and working at heights.
employees legal, financial
and third and reputational
parties or impacts that * We continue to invest in training to ensure we
to take appropriate would adversely maintain safe operating practices. During 2017 all
measures affect some senior leaders took part in a HSES leadership event.
to protect or all of
our environment our brands
and in response and businesses. * Security intelligence and operating procedures, as
to climate well as crisis management and business continuity
change. plans, are regularly evaluated and tested.
Risk Requiring
Standards
Governance * Significant Centrica representation on Board
oversight: Committees and establishment of a Shareholder Office
Board and to ensure that mitigation of HSES risks remains a
Safety, Health priority within the new joint venture organisation,
Environment, Spirit Energy.
Security
and Ethics
Committee * We actively engage with climate change bodies and
Risk climate: NGOs to offer our perspective, understand the
at a similar direction of potential future actions, and assess our
level readiness to manage through change.
Priority:
Safety, compliance
and conduct * A description of how we manage our environmental risk
is described on page 36.
--- ---------------------- ---------------------- -----------------------------------------------------------------
4 Strategy Successful
Delivery delivery of * The Board sets and approves the Group's strategy,
Risk that our strategy setting the strategic direction and confirming the
we do not requires delivering strategic choices made by the business. Regular
deliver our the energy reviews are conducted on changes in market trends and
strategy and services the competitive environment, and the business
due to insufficient our customers response.
capability desire in
to execute a way that
it in line satisfies * We have a clear financial framework to ensure capital
with plan their needs is allocated in line with the strategy and that
or failure in a competitive balance sheet strength and return on capital boundary
to adapt market place. conditions are met.
quickly enough Failure to
to respond identify changing
to changes trends in * The Board and Executive Committee regularly review
in the external customers' the capabilities required to deliver on the strategy
environment. needs, adapt and address gaps as they arise.
In our bottom-up to
process of changing market
risk reporting, and competitive
this is a environments,
key area deliver major
of focus transformation
for our business programmes
units and to be an efficient
functions. supplier,
Risk Requiring and build
Judgement the necessary
Governance capabilities
oversight: to compete,
Board have the potential
Risk climate: to impact
increased our cash flow
Priority: growth and
Cash flow value creation
growth and goals.
strategic
momentum
--- ---------------------- ---------------------- -----------------------------------------------------------------
5 External We operate
Market Environment in highly * We focus on understanding customer segments and their
Risk that competitive needs, aiming to design products and offerings that
events in and changing are attractive and competitive.
the external markets, where
market or customer behaviour,
environment needs and * We are increasing our investment in areas like
could affect demands are Connected Home and Distributed Energy & Power that
the delivery evolving due represent emerging customer needs and reinforce our
of our to digitisation, existing energy supply and services offerings,
strategy. energy efficiency, putting customers more in control of their energy use
External climate change, as described on page 33.
Risk government
Governance initiatives,
oversight: and the general * Regular analysis is undertaken of commodity price
Board economic outlook. fundamentals and their potential impact on our
Risk Climate: In addition, business plans and forecasts.
at a similar we are subject
level to global
Priority: market
Cash flow volatility
growth and in our upstream
strategic businesses
momentum in commodity
markets.
--- ---------------------- ---------------------- -----------------------------------------------------------------
6 Brand, Trust Failure to
and Reputation appropriately * We regularly monitor and review our level of customer
Risk that manage brand service, aiming to deliver a fair, simplified and
our competitive perception, transparent offering to all of our consumers.
position media attention Operational processes are in place to address failure
is compromised and campaign in service and customer complaints.
by poor standards or pressure
of fairness groups could
and transparency have a negative * We engage with NGOs, consumer and customer groups,
and by failing impact on political parties, regulators, charities and other
to protect consumer sentiment stakeholders to identify solutions to help reduce
our brands. and contribute bills and improve trust in the industry.
Risk Requiring to a fall
Judgement in overall
Governance customer numbers. * We review and monitor changes in our customer brand
oversight: Failure to position through net promoter score (NPS) and other
Board be fair and metrics as described on page 31.
Risk climate: transparent
increased in all our
Priority: operations * We consider our impact on society as part of being a
Customer could cause good corporate citizen. This is set out in the
satisfaction reputational Building strong communities section on pages 37 to
and operational damage and 38.
excellence if standards
are particularly
low, lead
to legal action.
--- ---------------------- ---------------------- -----------------------------------------------------------------
7 Change Management If change
Risk of failure projects are * Significant change management programmes are reviewed
in the not aligned as a regular aspect of Group and business unit
identification, to strategic performance reviews, and are regular agenda items of
alignment objectives Executive Committee meetings.
and execution or not implemented
of change appropriately,
programmes the expected * Change activity is managed through a network of
and business benefits may programme offices providing oversight and governance
restructuring. not be realised. at the appropriate level.
Risk Requiring If acquisitions
Judgement are not integrated
Governance effectively * We have dedicated change capability at Group and
oversight: the business business unit level to monitor the realisation of
Board benefits may benefits, the prioritisation of efforts and to share
Risk climate: not be realised. best practice.
at a similar
level
Priority: * Our people capability is continually reviewed and
Cost efficiency developed to ensure we have the right skills to
and simplification deliver our plans.
* We have post-merger integration guidelines in place
to integrate acquired businesses.
--- ---------------------- ---------------------- -----------------------------------------------------------------
8 Legal, Regulatory Our operations
and Ethical are the subject * Regulatory compliance monitoring activities are
Standards of intense performed by a single Group-wide function to drive
Compliance regulatory consistency and quality.
Risk of failure focus and
to comply we seek to
with laws deliver the * Control frameworks are in place in the UK and in
and regulations highest standards development in other markets to ensure that the
and behave in compliance. customer experience is delivered in line with our
ethically We recognise Customer Conduct guidelines. This is managed through
in line with any real or a Group-wide practice group.
Our Code, perceived
resulting failure to
in reputational follow Our * The Market Conduct practice group shares best
or financial Code or comply practice with standardised controls and processes and
damage. This with legal aligns mitigation activities where possible.
includes or regulatory
market conduct, obligations
customer would undermine * Data is a strategic asset and its protection is a
conduct, trust in our priority under a Steering Group led by the Executive
data protection business. Director, Centrica Consumer.
and financial Non-compliance
crime risk. could also
Risk Requiring result in * Our Code was launched globally in January 2018 to
Standards fines, penalties underpin the new values introduced in 2017. This sets
Governance or other the standard for behaviour across the Group.
oversight: interventions.
Board and
Safety, Health, * Where we enter new territories via acquisition or
Environment, organic growth we ensure country risks are identified
Security and managed appropriately, including anti-bribery and
and Ethics corruption risk and compliance with local
Committee legislation.
Risk climate:
at a similar
level
Priority:
Safety, compliance
and conduct
--- ---------------------- ---------------------- -----------------------------------------------------------------
9 Asset Development, Failure to
Availability invest in * Capital allocation and investment decisions are
and Performance the maintenance governed through the Investment Committee, the final
Risk that and development decision resting with the Group Chief Executive
failures of our assets Officer and/or Board of Directors.
in the development could result
or integrity in significant
of our investments safety issues * Group-wide minimum standards are applied to all
in operated or asset assets, whether operated or non-operated to give
and non-operated underperformance. confidence in their integrity.
assets could Operational
compromise integrity
performance is critical * Maintenance activity and improvement programmes are
delivery. to our ability conducted in all asset-based businesses to maximise
Risk Requiring to deliver effectiveness and production levels.
Judgement performance
Governance in line with
oversight: the strategic
Board objectives.
Risk climate:
decreased
Priority:
Customer
satisfaction
and operational
excellence
--- ---------------------- ---------------------- -----------------------------------------------------------------
10 Information Our substantial
Systems and customer base * Our information security strategy seeks to integrate
Security and strategic information systems, personnel and physical aspects
Risk of reduced requirement in order to prevent, detect and investigate threats
effectiveness, to be at the and incidents.
availability, forefront
integrity of technology
or security development, * We engage with key technology partners and suppliers,
of IT systems means that to ensure potentially vulnerable systems are
and data it is critical identified.
essential our technology
for Centrica's is robust,
operations. our systems * Regular controls testing and security patching around
Risk Requiring are secure our core systems is undertaken and our controls are
Standards and our data further tested periodically by outside experts.
with elements protected.
that are Sensitive
Risks Requiring data faces * Strengthening of the Chief Information Security
Judgement the threat Officer (CISO) role to oversee the development of
Governance of misappropriation, standards, controls and assurance across the Centrica
oversight: leading to estate.
Board and potential
Safety, Health, financial
Environment, loss and/or * We regularly evaluate the adequacy of our
Security reputational infrastructure and IT security controls, undertake
and Ethics damage to employee awareness and training and test our
Committee the Group. contingency and recovery processes, recognising the
Risk climate: Failure to evolving nature and pace of the threat landscape.
at a similar deliver IT
level solutions
Priority: in support * Established governance bodies to oversee plans to
Safety, compliance of the prioritised comply with new requirements including the European
and conduct objectives General Data Protection Regulation (GDPR).
and change
programmes
in the business
would have
consequences
both for our
organisational
transformation
and in some
cases, our
compliance
obligations.
--- ---------------------- ---------------------- -----------------------------------------------------------------
11 Financial The increasingly
Processing complex financial * Our financial control framework incorporates our
and Reporting accounting financial controls and management self-assessment
Risk of errors landscape, compliance, with progress being made to improve the
or losses including use of systems and reduce the reliance on manual
arising from new financial controls.
the processing reporting
and reporting standards,
of financial increases * We have implemented a revised balance sheet review
transactions the likelihood and reconciliation procedure to target minimising
for internal of errors control gaps arising in our underlying systems and
and external being made ensure that issues are detected on a timely basis.
purposes. in the application
This includes of accounting
potential judgements. * We undertake detailed testing and evaluation of the
errors such The potential effectiveness of our controls in response to critical
as the reassessment for failures financial risks and report to the Financial Risk,
of unbilled in core controls Assurance and Controls Committee quarterly.
power revenues around critical
in our North processes
America Business increases * Controls improvement is a key objective of the
Unit of GBP46m, in a period Finance transformation programme, with oversight of
reported of significant delivery of this objective provided by the Audit
in our November change. As Committee.
2017 trading Finance continues
update. to implement
Risk Requiring the functional
Standards transformation
Governance programme,
oversight: the risk of
Board control degradation
Risk climate: could increase
increased and this is
Priority: an area of
Safety, compliance significant
and conduct focus.
--- ---------------------- ---------------------- -----------------------------------------------------------------
12 Business We prioritise
Planning, how we use * Annual planning processes are subject to scrutiny and
Forecasting our resources challenge with respect to underlying market trends,
and Performance based on our competitive threats and organisational capability and
Management business plans delivery from the Executive Committee and the Board.
Risk that and forecasts.
plans and Failure to
forecasts accurately * Group Functions have adopted standardised planning
may not be plan and forecast, processes in support of the business priorities,
deliverable taking into driving improved integration of plans.
or may fail account the
to drive changing business
efficient environment, * Quarterly performance review meetings involving the
and effective could result Executive Committee enable the review of performance
performance in sub-optimal against forecasts, ensuring that mitigating actions
and the risk decisions or revisions are developed and implemented.
of failures and failure
in performance to realise
reporting. anticipated
This includes benefits.
the risk
that we do
not quickly
respond to
and reflect
performance
management
issues in
any of the
Business
Units as
and when
they arise.
Risk Requiring
Judgement
with elements
that are
Risks Requiring
Standards
Governance
oversight:
Board
Risk climate:
at a similar
level
Priority:
Cash flow
growth and
strategic
momentum
--- ---------------------- ---------------------- -----------------------------------------------------------------
13 People In challenging
Risk that conditions, * We continue to evolve a clearly defined people
we cannot it is critical strategy based on culture and engagement, equality
attract or that we attract and wellbeing, talent development, training and
retain employees and retain reward and recognition.
to ensure key capabilities
we have the across the
appropriate business. * We regularly review organisational capability in
capabilities The consequence critical business areas, reward strategies for key
to deliver of not being skills, talent management and learning and
our strategy. able to fulfil development programmes through external benchmarking.
There is key roles
also the could have
potential a detrimental * We conduct an annual survey of employee engagement
risk of industrial impact on and take seriously the messages arising with a plan
action in our ability of actions.
our Consumer to meet our
businesses. strategic
Risk Requiring objectives. * The Executive Committee has clear oversight through
Judgement The risk of regular discussions of the people related challenges
with elements industrial inherent in our transformation programme.
that are action in
Risks Requiring our businesses
Standards. would have * We engage with trade unions on restructuring and
Governance a potential issues that could impact terms and conditions with
oversight: impact on clear and open processes to promote an environment of
Board customer service trust and honesty.
Risk climate: levels and
increased retention.
Priority: We require * Our Code was launched in early 2018. This sets the
People and the right expectations for all employees, replacing the
building behaviours Business Principles.
capability from our leaders
and employees
to deliver
our business
strategy in
accordance
with our Values
and Our Code.
--- ---------------------- ---------------------- -----------------------------------------------------------------
14 Customer The delivery
Service of high quality * Customer and Field Operations teams monitor customer
Risk of failure customer service service levels, ensuring enquiries are answered in a
to consistently is central timescale and manner acceptable to the customer,
meet the to our business complaint levels are minimised, and that customer
expectations strategy. satisfaction is reviewed at all stages of the
of our customers With the entry customer journey.
through the of new competitors
customer to the market,
lifecycle. customers * Leadership teams in our front-line businesses
Risk Requiring are increasingly establish accountability for specific aspects of the
Judgement likely to customer journey and assess performance against
Governance switch if agreed metrics weekly.
oversight: they face
Board an unacceptable
Risk climate: customer experience. * Performance parameters are monitored on a weekly
at a similar Remaining basis for all third-party service providers involved
level at the forefront in the front-line and back office customer service
Priority: of digital process.
Customer developments
satisfaction and innovating
and operational to provide * Customer service agents are quality assessed for
excellence choice and consistency with a rigorous training and performance
control for management programme, and a structured performance
our customers management process is in place for field teams.
is critical.
This risk
faces increased * We operate an environment of continuous improvement,
scrutiny as incorporating an accredited programme (STAR), and use
political root cause analysis of complaint and NPS insight to
and regulatory continuously improve our service delivery.
attention
focuses on
introducing
competition
by applying
pressure over
pricing strategies.
--- ---------------------- ---------------------- -----------------------------------------------------------------
15 Balance Sheet Failure to
Strength operate within * We assess available resources on a regular basis and
and Credit the Group's this analysis underpins our going concern assumption
Position financial and viability analysis as described on pages 61 and
Risk that framework 62.
the balance resulting
sheet may in risk to
not be resilient maintaining * Significant committed facilities are maintained with
with implications our target sufficient cash held on deposit to meet working
for our credit credit rating, capital fluctuations as they arise.
rating, liquidity impacting
risk and our access
long-term to cost effective * Counterparty exposures are restricted through a Group
financial capital and Credit Limit policy which is regularly reviewed and
obligations. trading arrangements. adjusted as necessary.
Risk Requiring Long term
Judgement financial
Governance obligations * Wholesale credit risks associated with commodity
oversight: may increase trading and treasury positions are managed in
Board and in value due accordance with Group policy.
Audit Committee to factors
Risk climate: both inside
at a similar and outside * We consider accounting assumptions impacting on our
level of our control, balance sheet carefully, including decommissioning
Priority: for example and impairment, as described as part of the Group
Cash flow pension schemes, Financial Review on pages 48 to 51 and in note 3(b)
growth and resulting to the Financial Statements.
strategic in additional
momentum funding required
to meet our
obligations.
--- ---------------------- ---------------------- -----------------------------------------------------------------
16 Procurement Our business
and Supplier operations * All suppliers are required to sign up to our 'Ethical
Management rely on products Procurement' policies and procedures.
Risk of failure and services
to source provided through
responsibly third parties, * Financial health, risk and anti-bribery and
and to co-ordinate including corruption due diligence and monitoring is
and collaborate outsourced implemented in supplier selection and contract
with supply activities, renewal processes.
chain partners infrastructure
to ensure and operating
value delivery responsibility * Audits are conducted in relation to third-party
and continuity. for some assets. operation of jointly operated Exploration &
Risk Requiring We rely on Production assets.
Judgement these parties
with elements to comply
that are not only with * We review the ethical conduct of our suppliers
Risks Requiring contractual including a programme of supplier visits to provide
Standards terms, but additional assurance over practices employed,
Governance also legal, including respect for human rights, as part of being
oversight: regulatory a good corporate citizen as laid out on page 38.
Board and ethical
Risk climate: business
at a similar requirements. * Procurement practices have been reviewed across the
level Group and a global Procurement Policy and Standard
Priority: was implemented from 1 January 2018.
Customer
satisfaction
and operational
excellence
--- ---------------------- ---------------------- -----------------------------------------------------------------
Related Party Transactions
The Group's principal related party is its investment in Lake
Acquisitions Limited, which owns the existing EDF UK nuclear fleet.
The disclosures below, including comparatives, only refer to
related parties that were related in the current reporting
period.
During the year, the Group entered into the following arm's
length transactions with related parties who are not members of the
Group, and had the following associated balances:
2017 2016
Sale Purchase Sale Purchase Amounts
of goods of goods Amounts Amounts of goods of goods owed Amounts
and and owed owed and and from owed
services services from to services services (i) to
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- --------- --------- ------- ------- --------- --------- ------- -------
Joint ventures:
Wind farms (i) 1 (10) - - 7 (80) 120 (43)
Associates:
Nuclear - (527) - (40) - (617) - (57)
Other - - - - 4 (5) - -
----------------- --------- --------- ------- ------- --------- --------- ------- -------
1 (537) - (40) 11 (702) 120 (100)
----------------- --------- --------- ------- ------- --------- --------- ------- -------
(i) Disposed on 17 February 2017. See note 12(d) for further
details. Transactions have only been included above up to this
disposal date.
During the year, there were no material changes to commitments
in relation to joint ventures and associates. During the year a
provision against a receivable from one of the Group's joint
ventures was charged to the Group Income Statement amounting to
GBP1 million. No other provision for bad or doubtful debts relating
to amounts owed from related parties was recognised during the year
through the Group Income Statement (2016: nil). The balance of the
provision at 31 December 2017 was nil (2016: nil)
At the balance sheet date, the Group committed facilities to the
Lake Acquisition Group totalling GBP120 million, although nothing
has been drawn at 31 December 2017.
Key management personnel comprise members of the Board and
Executive Committee, a total of 18 individuals at 31 December 2017
(2016: 18).
Remuneration of key management personnel 2017 2016
Year ended 31 December GBPm GBPm
----------------------------------------- ----- -----
Short-term benefits 9.8 15.8
Post employment benefits 1.3 1.1
Share-based payments 4.8 7.8
----------------------------------------- ----- -----
15.9 24.7
----------------------------------------- ----- -----
Remuneration of the Directors of Centrica
plc 2017 2016
Year ended 31 December GBPm GBPm
--------------------------------------------- ----- -----
Total emoluments (i) 4.0 9.8
Amounts receivable under long-term incentive
schemes 1.9 -
Contributions into pension schemes 0.8 0.8
--------------------------------------------- ----- -----
(ii) These emoluments were paid for services performed on behalf
of the Group. No emoluments related specifically to services
performed for the Company. 2016 comparatives have been restated.
Further detail is provided in the Remuneration Report on pages 78
to 89.
Directors' responsibilities statement
In compliance with DTR 4.1.12R, the Annual Report 2017 contains
a Directors' responsibilities statement. This is reproduced below,
in line with DTR 6.3.5R. The statement relates to and is extracted
from the Annual Report 2017 and does not attach to the extracted
information presented in this announcement or the preliminary
results announcement released on 22 February 2018.
The Directors, who are named on pages 64 and 65, are responsible
for preparing the Annual Report, the Remuneration Report, the
Strategic Report and the Financial Statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Accordingly, the Directors have
prepared the Group Financial Statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU) and have elected to prepare the Company
Financial Statements in accordance with United Kingdom Generally
Accepted Accounting Practice including FRS 101 'Reduced Disclosure
Framework' (United Kingdom Accounting Standards and applicable
law). Under company law, the Directors must not approve the
Financial Statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and the
Company and of the profit or loss of the Group for that period. In
preparing these Financial Statements, the Directors are required
to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether IFRS as adopted by the EU and applicable UK
Accounting Standards have been followed, subject to any material
departures disclosed and explained in the Group and Company
Financial Statements respectively; and
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the Financial Statements and the Remuneration Report
comply with the Act and, as regards the Group Financial Statements,
Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and the Group and hence for
taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Furthermore, the Directors are responsible for the maintenance
and integrity of the Company's website. Legislation in the UK
governing the preparation and dissemination of Financial Statements
may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Accounts 2017,
when taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Group's performance, business model and strategy.
Each of the Directors confirm that to the best of their
knowledge:
-- the Group Financial Statements, which have been prepared in
accordance with IFRS as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Group;
-- the Strategic Report contained on pages 2 to 62 together with
the Directors' and Corporate Governance Report on pages 63 to 100,
includes a fair review of the development and performance of the
business and the position of the Group, together with a description
of the principal risks and uncertainties that it faces;
-- as outlined on page 73, there is no relevant audit
information of which Deloitte LLP are unaware; and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Company's auditors are
aware of that information.
ENDS
Enquiries:
Investors and Analysts:
Tel: +44 (0)1753 494900
Email: ir@centrica.com
Media:
Tel: +44 (0)1784 843000
Email: media@centrica.com
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 company news service from the London Stock Exchange
END
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