Slide 1: British Gas Services City seminar
British Gas Services City seminar 18 May 2007
Slide 2: Nick Luff, Group Finance Director
Nick Luff Group Finance Director
Slide 3: Objectives
Objectives • To provide a detailed insight into British Gas Services – The unique capabilities of our business – The extent of the opportunity in the UK – Our strategy to exploit the opportunity
Slide 4: Chris Weston, Managing Director, British Gas Services
Chris Weston Managing Director, British Gas Services
Slide 5: Agenda
Agenda • Business B i overview i • Market opportunity • Our strategy • Financial review • Summaryy • Q&A
Slide 6: Business overview
Business overview
Slide 7: Business overview: Key facts
Business overview: Key facts ► Customers 4.5 million ► Products holdings 7.2 million ► Customer calls 14 million ► Call centres 5 ► Engineers 9,000 ► Jobs completed 9.6 million ► Parts P t used d 6 3 million 6.3 illi ► Turnover 2006 £1.1 billion ► Operating profit 2006 £102 million • Probably the la
Slide 8: Business overview: Products and brands
Business overview: Products and brands Gas service, repair & Electrical service, repair & Plumbing & drains repair installation improvements • Central Heating Care • Plumbing & Drains Care • Home Electrical Care • Gas Appliance Care • Dyno D d drains i • Kitchen Kit h A Appliance li C Care • On-dema
Slide 9: Business overview: Fulfilment model
Business overview: Fulfilment model If the required parts are on the van: Customer Call Centre Engineer visits Completes Job Re-orders parts 24 x 7 x 365 customer using parts in van used on Laptop Breakdowns repaired on first visit: 70% Annual Safety Visits completed first time: 97% This model is us
Slide 10: Business overview: Fulfilment model
Business overview: Fulfilment model If the required parts are not on the van: Customer Call Centre Engineer visits Orders parts from NDC processes 24 x 7 x 365 customer NDC order Overnight to 720 Engineer collects Engineer revisits Engineer completes collection points parts next day customer job Thi
Slide 11: Market opportunity
Market opportunity
Slide 12: Market opportunity: £6bn UK home services market
Market opportunity: £6bn UK home services market Electrical Central Heating Ser ices Services £1 8bn £1.8bn Installation % 20 % 20 10 10 0 £1.2bn 0 Other £6bn £0.6bn £0 6bn £0.6bn Plumbing & Drains Central Heating % 20 Service & Repair 30 £1 8bn £1.8bn 10 % 20 0 10 0 Key BGS Market share
Slide 13: Market opportunity: Gas central heating 7.9 million
holds Market opportunity: Gas central heating 7.9 million 25 Million househ No gas central heating 3.7m 20 Social housing 15 Private rental 1.7m 10 Owner occupier 5.9m 2.0m 5 Households with care contracts Households with insurance products Households currently minded to buy contracts Households wit
Slide 14: Market opportunity: Plumbing and drains 11.7 million
holds Market opportunity: Plumbing and drains 11.7 million 25 Shared / no drains Million househ Social housing 1.4m 20 3.7m P i t rental Private t l 15 3.4m 10 Owner occupier 8.3m 5 Households with care contracts Households with insurance products Households currently minded to buy contracts Househo
Slide 15: Market opportunity: Home electrical
holds Market opportunity: Home electrical 15 million 25 Million househ Social housing/other 1.0m 0.8m 20 3.6m P i t rental Private t l 15 11.4m 10 Owner occupier 5 Households with care contracts Households with insurance products Households currently minded to buy contracts Households with no contra
Slide 16: Market opportunity: Central heating installation
Market opportunity: Central heating installation BGS volume share: 18% Young working indebted Affluent empty nesters housand installatiions 550 500 450 141k 400 176k 350 Th 300 Low affluence elderly Gilt edged lifestyles 32k 250 200 70k 102k 150 Budgeting families 100 50 0 Total installations market
Slide 17: Market opportunity: Energy efficiency
Market opportunity: Energy efficiency • The average household’s annual carbon footprint is around 21 tonnes of CO2 • 25% of the footprint comes from energy emissions Public Services Cl th Clothes E Energy Food & Drink Leisure & Recreation Transportation H Household h ld • The government is committed
Slide 18: Our strategy
Our strategy
Slide 19: Our strategy
Our strategy • Best at basics • Reinforce and grow • Our people
Slide 20: Best at basics: Competitive advantage from customer focus
Our strategy: Best at basics Competitive advantage from customer focus 0 20 40 60 80 100 Helpful and friendly staff 100 Can be trusted 73 Safetyy reassurance and technical expertise p 71 Easy to deal with 70 Straightforward 70 Resolve query 1st time 40 We have a good understanding of what customers
Slide 21: Best at basics: Our formula for success
Our strategy: Best at basics Our formula for success MILLIONS of lifelong valued customers
Slide 22: Our formula for success: Great personalised contact
Our strategy: Best at basics Our formula for success: Great personalised contact • In 2006 we answered 14.2 million customer calls • Winter 2006/07 average speed to answer less than 15 seconds • Improved sales conversion • Investment in people, training and development
Slide 23: Our formula for success: Fast seamless deployment
Our strategy: Best at basics Our formula for success: Fast seamless deployment • In the peak 2006/07 winter week we completed 190,000 jobs • 97% of customer appointments for service and repair in winter were attended tt d d without ith t rescheduling h d li • g Significant improvement p in operation
Slide 24: Our formula for success: Experts welcomed into customers' homes
Our strategy: Best at basics Our formula for success: Experts welcomed into customers’ homes • 7 training centres with around £25 million invested in training each year • In 2006 completed over 9.6 million jobs in peoples’ p p homes • On-demand volumes growing and sales conversion i rate t iimprovin
Slide 25: Our formula for success: Safe solutions right first time
Our strategy: Best at basics Our formula for success: Safe solutions right first time • F ll qualified Fully lifi d C Corgii engineers i • Near miss reporting commenced in 2006 • Lost time incidents in the first quarter fell by 6% compared to the same period last year • 230k CO detectors supplied to
Slide 26: Best at basics: Performance for winter 2006/07
Our strategy: Best at basics Performance for winter 2006/07 Improvement Winter 2006/07 Year on Year Calls answered 7 1 million 7.1 Over 15% Calls Abandoned 3.8% Over 80% Average Speed to answer Under 15 seconds Over 80% Breakdowns 2.3 million 7% Broken Promises Under 3% Over 45% We have made signifi
Slide 27: Best at basics: Our top competitive advantages
Our strategy: Best at basics Our top competitive advantages 1 British Gas brand 1. 2. National coverage 3. Unique business model with leading edge field technology 4. 9,000 engineers with award winning training 5. Customer focus - measured by y the Net Promoter Score
Slide 28: Measuring success: The net promoter score
Our strategy: Best at basics Measuring success: The net promoter score NPS has just been adopted by the business and is improving British Gas Services (March 07) 40% Sample of other companies’ scores in 2006 Top performers Others • Waitrose 73% • McDonalds 10% • Vodafone 67% • Co-op Co op 3% • Tesco
Slide 29: Our strategy
Our strategy • Best at basics • Reinforce and grow • Our people
Slide 30: Reinforce and grow
Our strategy: Reinforce and grow Route 3 • New business development p Develop adjacent – Energy efficiency products to maximise – Central heating installations customer value 3 Route 2 Maximise cross • Improved channel efficiency product holding per customer 2 • Integrated offerings Route 1 Grow bas
Slide 31: Reinforce and grow: Broaden appeal
Our strategy: Reinforce and grow Route 1 - Broaden appeal Route 3 • New business development p Develop adjacent – Energy efficiency products to maximise – Central heating installations customer value 3 Route 2 Maximise cross • Improved channel efficiency product holding per customer 2 • Integrated o
Slide 32: Broaden appeal: Develop products for new / existing customers
Our strategy: Reinforce and grow Route 1 - Broaden appeal: Develop products for new / existing customers Pre 2006 2006 2007 Risk averse Tailored Peace of Mind 27.8 % Total Peace of British G B Mind H HomeCare C Gas Sha Gas Appliance Care 1.6 % Partial Care FlexiCare are* (%) On--demand and Care On 2
Slide 33: Broaden appeal: Provide products for risk takers
Our strategy: Reinforce and grow Route 1 - Broaden appeal: Provide products for risk takers On-demand FlexiCare 140 160 120 140 100 120 80 100 000's 000's 80 0 60 60 40 40 20 20 0 0 2006 2007 Forecast 2006 2007 Forecast On-demand On demand workload On-demand On demand and care Plumbing and Drains Ho
Slide 34: Reinforce and grow: Maximise cross product holding
Our strategy: Reinforce and grow Route 2 - Maximise cross product holding Route 3 • New business development p Develop adjacent – Energy efficiency products to maximise – Central heating installations customer value 3 Route 2 Maximise cross • Improved channel efficiency product holding per customer
Slide 35: Maximise cross product holding
Our strategy: Reinforce and grow Route 2 - Maximise cross product holding From: ers custome New HomeCare H C £24.25 / month customer 400 New c HomeCare 300 £20.75 / month £27 / month On- HomeCare demand 200 £16 / month mers and care Existing custom HomeCare 100 £12 / month On- FlexiCare demand 100 £
Slide 36: Maximise cross product holding: Improved channel efficiency
Our strategy: Reinforce and grow Route 2 - Maximise cross product holding: Improved channel efficiency Improving inbound X-sell conversion Increasing online energy traffic Weekly Inbound Cross Sales (000’s) s 9 Conversion Rate (%) Weekly internet Sales (000’s) 16 Conversion Rate (%) Internet Energy
Slide 37: Maximise cross product holding: Integrated offerings
Our strategy: Reinforce and grow Route 2 - Maximise cross product holding: Integrated offerings 16m 16 2m Residential 4m Energy British Gas accounts Services accounts that are 10m Non Owner potential i l energy Occupier accounts customers of Residential accounts 2m Potential British Gas British Gas
Slide 38: Reinforce and grow: Develop adjacent products
Our strategy: Reinforce and grow Route 3 - Develop adjacent products Route 3 • New business development p Develop adjacent – Energy efficiency products to maximise – Central heating installations customer value 3 Route 2 Maximise cross • Improved channel efficiency product holding per customer 2 • I
Slide 39: Develop adjacent products: Central Heating Installations
Our strategy: Reinforce and grow Route 3 - Develop adjacent products: Central Heating Installations • Large market: £1.8 billion • Completed 91k installs in 2006 • Generated £264 million turnover in 2006 • Has not had significant management foc focus s prior to H2 2006 • Historic under investment no
Slide 40: Develop adjacent products: Central Heating Installations
Our strategy: Reinforce and grow Route 3 - Develop adjacent products: Central Heating Installations Gilt edged lifestyles Affluent empty nesters Budgeting families Young working indebted Low affluence elderly 32k 141k 102k 176k 70k • Efficient channels to market – National N ti l coverage – 330 sale
Slide 41: Develop adjacent products: Energy Efficiency
Our strategy: Reinforce and grow Route 3 - Develop adjacent products: Energy Efficiency • B iti h G British Gas “E “Energy Savers S R Report” t” – 1.8m customers completed the report in 2006 – Now N h hold ld d data t on 6% off the th UK housing h i stock t k – 46% have old inefficient boilers – Cus
Slide 42: Reinforce and grow
Our strategy: Reinforce and grow Route 3 • New business development p Develop adjacent – Energy efficiency products to maximise – Central heating installations customer value 3 Route 2 Maximise cross • Improved channel efficiency product holding per customer 2 • Integrated offerings Route 1 Grow bas
Slide 43: British Gas Services Strategy
British Gas Services Strategy • Best at basics • Reinforce and grow • Our people
Slide 44: Our strategy: Our people
Our strategy: Our people People are our key asset: • , Around 11,000 of our people p p visit customers in their homes each day y • Our people answer 14 million calls a year • We complete 9.6 9 6 million jobs in customers customers’ homes each year Getting the people stuff right is fundamental. We mu
Slide 45: Our path to a world class people-centred organisation
Our strategy: Our people Our path to becoming a world class people-centred organisation Clear vision & values The best players Motivation Spirit of Clear direction service Space to Clarity on talent definition and Individual grow Strong agenda reward Customer leadership advocacy CSA & engineer d dev
Slide 46: Financial Overview, Chris Stern
Financial Overview Ch i Stern Chris St Finance Director, British Gas Services
Slide 47: Financial overview
Financial overview • 2006 a year of transition • Driving improved performance • Future expectations
Slide 48: Financial overview: 2006 a year of transition
Financial overview: 2006 a year of transition 2006 2005 Turnover £1.1bn £1.0bn Operating Profit £102m £111m Operating Margin 9% 12% Operating Cashflow £83m £94m
Slide 49: Results impacted by transition and challenging winter
Financial overview: 2006 a year of transition Results impacted by transition and challenging winter • Separation from British Gas Residential • Fixing our call centres • Improving deployment • St bili i our iinfrastructure Stabilising f t t • Restructuring and organisational change • Challenging win
Slide 50: Financial overview
Financial overview • 2006 a year of transition • Driving improved performance • Future expectations
Slide 51: Financial overview: Driving improved performance
Financial overview: Driving improved performance • Maximise value of sales growth • Improve margins through efficiency and cost control • Investments to underpin growth g
Slide 52: Maximise value of sales growth: Sales projections
Financial overview: Driving improved performance Maximise value of sales growth: Sales projections 10,000 Product Relationsh 8,000 6,000 hips 4 000 4,000 2,000 0 2004 2005 2006 2007 2008 2009 2010 Central heating Kitchen Appliance Plumbing & Home Electrical New Products Contracts Care Drains Care Ca
Slide 53: Improving average product contribution
Financial overview: Driving improved performance Maximise value of sales growth: Improving average product contribution • L Leveraging i existing i ti iinfrastructure f t t reduces d unit it costt per product d t • Higher proportion of secondary products drives higher margins Secondary Products (Plu
Slide 54: Financial overview: Driving improved performance
Financial overview: Driving improved performance • Maximise value of sales growth • Improve margins through efficiency and cost control • Investments to underpin growth g
Slide 55: Improve margins: Engineer growth and flexibility
Financial overview: Driving improved performance Improve margins: Engineer growth and flexibility 10 000 10,000 E i Engineer numbers b 9,000 8,000 7,000 6,000 5 000 5,000 4,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 • Proven recruitment capability • High g qqualityy training g facilities • Org
Slide 56: Improve margins: Engineer growth and flexibility
Financial overview: Driving improved performance Improve margins: Engineer growth and flexibility • Short term fluctuations balanced with Annual Safety Visit programme • Servicing peaks are filled via internal flexibility and contractors Operating plan 2007 workload 800,000 Winter hours Winter hours
Slide 57: Improve margins: Leverage our current infrastructure
Financial overview: Driving improved performance Improve margins: Leverage our current infrastructure Call management Handheld Device • Job Despatch • Route Guidance Engineer laptop • Customer interface • Contract Administration • Work Management • Field Application • Job Despatch
Slide 58: Improve margins: Leverage our current infrastructure
Financial overview: Driving improved performance Improve margins: Leverage our current infrastructure • I Improve callll centre t and dddeployment l t efficiency ffi i – General managers fully accountable for all activities – Restructuring to introduce appropriate spans of control – Voice recognitio
Slide 59: Improve margins: Cost efficiency programme
Financial overview: Driving improved performance Improve margins: Cost efficiency programme • I d Independent d t review i off operating ti model d l and dbbestt practice ti • Cost reduction programme already announced • Process re-design using 6 Sigma capability • Current cost reduction initiatives
Slide 60: Financial overview: Driving improved performance
Financial overview: Driving improved performance • Maximise value of sales growth • Improve margins through efficiency and cost control • Investments to underpin growth g
Slide 61: Investments to underpin growth
Financial overview: Driving improved performance Key drivers of performance: Investments to underpin growth • Marketing expenditure to stimulate growth • Refresh and enhance our infrastructure – Improve consistency of delivery – Increase flexibility in pricing and products – Support increased respon
Slide 62: Financial overview
Financial overview • 2006 a year of transition • Driving improved performance • Future expectations
Slide 63: Financial overview: Future expectations
Financial overview: Future expectations 2007 expected to produce strong growth Operating Profit 2004 - 2007 Actual Operating Profit Analyst consensus 150 £m 100 50 0 2004 2005 2006 2007
Slide 64: Financial overview: Future expectations
Financial overview: Future expectations • We have a sustainable platform for growth • We will continue to grow our revenues through: – Extending g the customer base – Effective cross sell – Product innovation • We will also improve operating margins through: – Favourable product mix – Leveraging the
Slide 65: Summary
Summary
Slide 66: Exploiting opportunities and delivering our potential
Exploiting opportunities and delivering our potential • Significant future market potential • Simple clear strategy • Well positioned to exploit the opportunity