22 March 2017

Annual Report and Accounts 2016

Further to the release of the Company's preliminary results announcement on 23 February 2017, the Company announces that it has today published its Annual Report and Accounts 2016 (Annual Report 2016).

The Company also announces that on 20 March 2017 it posted to shareholders the Notice of Annual General Meeting to be held at 2.00pm on Monday 8 May 2017 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:

-     Annual Report and Accounts 2016

-     Annual Review 2016

-     Notice of Annual General Meeting 2017

The above documents are also available at centrica.com/ar16.

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 23 February 2017. That information, together with the information set out below, which is extracted from the Annual Report 2016, is provided in accordance with the Disclosure and Transparency Rule 6.3.5, 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 2016.  Page and note references in the text below refer to page numbers and note numbers in the Annual Report 2016.  

Our Principal Risks and Uncertainties

Managing our risks and uncertainties is key to achieving our priorities.

LINKS TO STRATEGY

In line with our strategy we are concentrating more investment on our customer-facing businesses organised into the two global customer-facing divisions of Centrica Consumer and Centrica Business. We are focused on delivering high levels of customer service, improving customer engagement and loyalty, and developing innovative products, offers and solutions for both residential and business customers, underpinned by investment in technology.  Our asset businesses of Exploration and Production and Centrica Storage continue to play an important role in our portfolio providing cash flow diversity and balance sheet strength.

Our activities for near-term implementation and delivery of our strategy are framed around the five priorities below. These priorities are a lens through which we assess our risks and discussions around risk appetite. Each priority has associated risks, which are managed as part of our overall system of risk management and internal control.

Our five priorities

Safety, compliance and conduct

Customer satisfaction and operational excellence

Cash flow growth and strategic momentum

Cost efficiency and simplification

People and building capability

Managing the Risks to the Delivery of our Priorities

Risk management is fundamental to the way the Group is governed and managed. Our system of risk management and internal control comprises the following elements that are assessed for effectiveness annually:

·    Business Principles: sets our expected behaviours across the organisation.

·    Enterprise Risk Framework: incorporates the principal risks within the Group Risk Universe, as outlined below.

·    Board and Committees' governance: committees are structured to be aligned with the Principal Risks identified, as outlined below.

·    Executive management oversight: establishing appropriate executive processes to ensure appropriate planning and performance management.

·    Operational management accountability and certification: represents the first line accountability for the risk and control environment.

·    Delegations of Authority: structure within which accountability is delegated through the organisation in accordance with identified risk appetite.

·    Management systems: the detailed Policies, Standards and Procedures establishing the requirement for process level controls that are monitored throughout the organisation.

·    Assurance providers: second and third line assurance provided to ensure that Policies, Standards and Procedures are being followed and that risks are being mitigated in line with risk appetite.

The Group's strategic review in 2015 and its implementation in 2016 highlighted emerging risks and provided an opportunity to simplify and standardise how significant risks are managed. We have identified the differing nature of our risks including:

·    Risks that require standards where our tolerance for error is generally very low. This will include Health, Safety, Environment and Security, Legal and Regulatory Compliance, Financial Processing and Reporting, Information Systems and Data Security, and Ethical and Behavioural Standards. For these risks there will be management systems providing clearly prescribed standards with ring-fenced functional monitoring and assurance.

·    Risks where judgement is required within a range of acceptable outcomes in order to deliver our priorities. This includes areas where we need to take a certain level of risk such as in commodity trading and our investment in the growth areas of the business.

·    Risks resulting from external factors where we have limited influence over their occurrence, but can influence the impact on our business through our actions.

Assessing our Principal Risks in 2016

As in previous years we identified and assessed our risks within the categories of Principal Risk overleaf to ensure appropriate mitigating activities. During 2016 the risks that were prioritised for leadership attention, and those that had most significant impact in our assessment of the future viability of the organisation, particularly related to:

·    ensuring we deliver a safe and compliant operating environment in all respects;

·    our strategic transformation and its impact on our people;

·    the changing political environment, and the potential for further intervention, including Brexit;

·    the evolving regulatory requirements, particularly the outcome of the Competition and Markets Authority (CMA) investigation;

·    ongoing volatility in the commodity market with its impact on pricing; and

·    our commitment to our growth businesses and excellence in customer service.

We align our assessment of the extent of risk we wish to take with our priorities and express our risk appetite in relation to these priorities. For example, in relation to ensuring we have a safe and compliant operating environment our appetite is very low, whereas we are prepared to take risks in relation to delivering our growth objectives.

The Principal Risks, and their related components, are allocated oversight through the Board and its Committees as indicated overleaf. The table also provides an indication of the risk mitigation strategy for each risk category, reflecting our appetite for risk, and our view on changes in the risk climate compared with 2015.

The Board retains overall non-executive responsibility for risk across the Group. With the exception of certain risks that the Board reserves to itself, oversight of specific Principal Risks contained within the Group Risk Universe are delegated by the Board to one or more of its Committees. The table below summarises each Principal Risk with reference to oversight by the Board or its Committee, its risk climate and the associated priority.

Related Party Transactions

The Group's principal related parties include its investments in wind farms and the existing EDF UK nuclear fleet. 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:

(i)      Amounts owed from Lincs Wind Farm Limited include a shareholder loan of £113 million classified as held for sale, as shown in note 12(c).

Investment and funding transactions for joint ventures and associates are disclosed in note 14. Shareholder loan interest income for wind farm joint ventures in the period was £13 million (2015: £17 million). The terms of the outstanding balances related to trade receivables from related parties are typically 30 to 120 days. The balances are unsecured and will be settled in cash. No provision against amounts receivable from related parties was recognised during the year through the Group Income Statement (2015: nil). The balance of the provision at 31 December 2016 was nil (2015: nil).

At the balance sheet date, there were back-to-back committed facilities with Lake Acquisition Limited's facilities to EDF Energy Nuclear Generation Group Limited totalling £120 million at Centrica's share, but nothing has been drawn down at 31 December 2016.

Key management personnel comprise members of the Board and Executive Committee, a total of 18 individuals at 31 December 2016 (2015: 16).

(ii)                    These emoluments were paid for services performed on behalf of the Group. No emoluments related specifically to services performed for the Company.

Directors' responsibilities statement

The Directors, who are named on pages 66 and 67, 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 2016, 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 64 together with the Directors' and Corporate Governance Report on pages 65 to 99, 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 75, there is no relevant audit information of which PwC 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