Slide 1: British Gas Investor Day, 7 September 2011
British Gas Investor Day 7 September 2011 e, a | 1 BritishGas centrica Looking after your world
Slide 2: Disclaimer
Disclaimer This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Centrica shares or other securities. This presentation contains certain forward-looking statements with respect to the financial condition, results, operations and busi
Slide 3: Angela Williams, HR Director, British Gas
Angela Williams HR Director, British Gas FD : 3 BritishGas centrica Looking after your world
Slide 4: Sam Laidlaw, Chief Executive
Sam Laidlaw Chief Executive 4 re, F BritishGas Centrica Looking after your world
Slide 5: Agenda
Agenda 09:30 Introduction Sam Laidlaw Update on strategy and progress Phil Bentley Ian Peters Chris Jansen Q&A All 11:45 Breakout sessions: Tour of National Distribution Centre British Gas Business Ian Peters / Kanat Emiroglu British Gas New Markets Gearoid Lane 16:00 Close Phil Bentley / Nick Luff
Slide 6: Our Strategic Priorities
Our Strategic Priorities 1 Grow British Gas . . . leading the transition to low carbon homes and businesses 2 Deliver value from our growing upstream business . . . securing sustainable energy for our customers 3 Build an integrated North American business . . . with leading positions in deregulated
Slide 7: Well balanced business model
Well balanced business model Gas sourced from Energy Market Share own production Peak power cover ratio 100% 100% 100% External Coal purchases contracts External Wind purchases Competitors Nuclear Own production Gas-fired 42% British Gas 26% 0% 0% 0% SOURCE: OFGEM Gas Electricity 2011E 2011E • Leadi
Slide 8: Strongly positioned for growth
Strongly positioned for growth • Strong profit growth and cash generation through the cycle – distinctive capabilities and scale, leaders in innovation • Focus on maintaining a competitive position in residential energy – industry leading retention – relentless focus on costs and processes, underpin
Slide 9: Phil Bentley, Managing Director, British Gas
Phil Bentley Managing Director, British Gas FD : 9 BritishGas centrica Looking after your world
Slide 10: The UK energy and services market is both significant and attractive
The UK energy and services market is both significant and attractive • Energy supply remains profitable for players with scale, systems and service • Energy services is a growing market with attractive margins • Government imperative to transform energy efficiency across Britain • Technology will be
Slide 11: British Gas is well positioned in this market
British Gas is well positioned in this market • 12 million homes, half of all UK households Customers • No. 1 domestic supplier of both gas and electricity and service • One million business sites, No.1 in SME gas and electricity Capabilities • National base of over 11,000 highly trained and engaged
Slide 12: Customer satisfaction continues to improve
Customer satisfaction continues to improve Affinity with energy brands Residential energy customer satisfaction 5.0 30 2007 2009 2010 4.8 25 British Gas 4.6 20 Brand Affinity 4.4 15 4.2 10 4.0 5 3.8 0 British E.ON SSE EDF SPW RWE SOURCE: TNS Gas 3.6 -5 May Jul Sep Nov Jan Mar May SOURCE: MORGAN STAN
Slide 13: Safety through engaging our colleagues is a key priority
Safety through engaging our colleagues is a key priority Improving safety culture Engaged and customer focused workforce 1.5 LTI per 100,000 hours worked 30% average reduction rate 1.0 0.5 0.0 2006 2007 2008 2009 2010 2011E 13
Slide 14: Our 'Planet Home' brand campaign has been a great success
Our „Planet Home‟ brand campaign has been a great success Total TV advertising cut-through 40% 30% 20% 10% 0% 2008 2009 2010 2011 SOURCE: TNS 14
Slide 15: Leveraging scale and systems to reduce costs
Leveraging scale and systems to reduce costs • £200m BGR cost reduction (2006-8), further £100m cost reduction from integration re-invested in the business Scale • Procurement – 5 year deals with Travis Perkins and Worcester Bosch • Shared winter contingency reducing headcount • Engineer lead genera
Slide 16: We are innovating to deliver improved customer experience and enter new markets
We are innovating to deliver improved customer experience and enter new markets Digital innovation creating new ways for . . . and we are generating leading customers to interact with us . . . capabilities to enter into new markets Smart Installations per annum (m) 16
Slide 17: Industry leading margins and improved cross-sell capabilities
Industry leading margins and improved cross-sell capabilities Published residential energy margins Maximising customer value 10% 9.0% 2.3 8% Joint Customers (m) 2.2 6% CAGR 7% 4% 2.1 2.3% 2% 0.5% SP EDF Npower 2.0 0% British SSE E.ON -0.2% -2% Gas 1.9 -4% -3.9% -4.7% -6% 1.8 Based on 2010 Ofgem segm
Slide 18: We have delivered a strong five year performance
We have delivered a strong five year performance Operating profit (2006-2011) Customer account growth (2007 – 2010) 1,400 70 600 27.0 Operating Profit (£m) 1,200 60 MAH gas price (p/thm) Account growth (‘000) 26.5 Total accounts (m) 1,000 50 400 26.0 800 40 25.5 600 30 200 25.0 400 20 200 10 24.5 0
Slide 19: We face a challenging regulatory environment
We face a challenging regulatory environment Ofgem focus British Gas addressing key Ofgem issues Transparency of • Most transparent financial statements of all suppliers – full accounts reconciliation of Ofgem statements with Annual Report Details in the bill • Rated top in the industry by Consumer
Slide 20: Business outlook
Business outlook BGR Ian Peters BGS Chris Jansen BGB Kanat Emiroglu BGNM Gearoid Lane 20
Slide 21: BGR – maintaining operating profit in a volatile market
BGR – maintaining operating profit in a volatile market Residential energy operating profit 800 800 70 70 60 60 • Maintaining profits . . . – reduced churn 600 600 – customer service Operating Profit (£m) 50 Gas Market price (p/thm) 50 – cost efficiencies 40 40 • . . . in an unpredictable environmen
Slide 22: BGS – steady double digit growth despite a challenging market environment
BGS – steady double digit growth despite a challenging market environment Operating profit and product holdings New market opportunities create further growth opportunities 300 9.0 8.8 • Service excellence 250 250 8.6 Operating Profit (£m) • Cost efficiencies Product Holdings (m) 8.4 200 8.2 • Partn
Slide 23: BGB – near term investment driving faster longer term growth
BGB – near term investment driving faster longer term growth Strong operating profit growth Investment in future growth ahead of expectations • Economy and competition putting pressure on margins in short term • Leverage BGR systems and processes • Marketing-led tailored propositions Transform Inves
Slide 24: BGNM – the market for energy efficiency is growing
BGNM – the market for energy efficiency is growing and will support the mainstream business Revenue has trebled in two years . . . . . . from new markets, customers and capabilities Revenue (£m) 400 • Local government relationships • Housing association contracts 300 • Acquired capabilities in local
Slide 25: Good progress on 'Grow British Gas' strategy
Good progress on „Grow British Gas‟ strategy – five longer term focus areas emerging Progress achieved Longer term focus Electric vehicle partnerships ‘Capture new Green Deal markets’ „Home Hub‟ • Service excellence to build trust Smart meter rollout • Value-based customer management ‘Take the lead’
Slide 26: Ian Peters, Managing Director, British Gas Energy
lan Peters Managing Director, British Gas Energy J . 26 BritishGas Centrica Looking after your world
Slide 27: Residential: A sustainable business
British Gas Residential A sustainable business Customer • Churn lower than industry average, market share growth Growth Customer • Lower complaints, NPS improvement, highly motivated people, Service No. 1 for customer satisfaction Operating • Lowest operating costs per account in 2010, effective bad
Slide 28: Strong customer growth underpinned by improved retention
British Gas Residential Strong customer growth underpinned by improved retention Energy customer growth Customer churn 16.2 33.2% 33.2% 23% Residential customer accounts ('000) 33.0% 33.0% 21% 16.0 (%) Share (%) 32.8% 32.8% 19% Customer churn (%) Customer Churn (%) Market Share 15.8 32.6% 32.6% 17%
Slide 29: Improved customer service and reduced complaints
British Gas Residential Improved customer service and reduced complaints Contact net promoter score (NPS) Market share of Ombudsman complaints 40 60% BGR Ombudsman complaints (% of total) 30 50% 20 40% 10 30% 0 2008 2009 2010 2011 20% -10 -20 10% -30 0% 2007 2008 2009 2010 2011 H1 • Call volumes dow
Slide 30: Relentless focus on operating costs underpinned by our systems
British Gas Residential Relentless focus on operating costs underpinned by our systems Operating costs per account Back office efficiency 110 30 100 25 Operating cost per account (£) 60% reduction Back office costs (£m) 90 20 80 15 70 10 60 5 50 0 2008 2009 2010 SOURCE: 2010 OFGEM SEGMENTAL STATEMEN
Slide 31: Successfully managing customer debt in a deteriorating economy
British Gas Residential Successfully managing customer debt in a deteriorating economy Residential bad debt charge as % of revenue Bills outstanding >60 Days 3.0% 16% 2.6% 15.4% 2.5% 15% 2.0% 14.7% 1.7% 1.5% 1.5% 14% 1.1% 1.0% 13.1% 13% 0.5% 0.0% 12% 2008 2009 2010 2011E 2008 2009 2010 • Risk based
Slide 32: Systems innovation putting us ahead of the competition
British Gas Residential Systems innovation putting us ahead of the competition • Billing platform fully established – leverage for BGB • First to be Smart • Back office re engineered, now front office transformation • Increasingly multi-channel – online, iPhone, Android, webchat, multi-brand • Opera
Slide 33: Delivering step change in customer contact through innovation
British Gas Residential Delivering step change in customer contact through innovation Online contact growth Product innovation 100% 80% Offline contact 60% 40% Online 20% contact 0% 2008 2009 2010 2011 • Online contact 29% higher than call volumes in 2010 and continuing to grow • Over 1m EnergySmart
Slide 34: We continue to manage for sustainable profitability
British Gas Residential We continue to manage for sustainable profitability Challenge Profit Actions impact Customer • Already reducing churn ahead of the industry retention • Smart propositions enabling further 30% improvement in churn Delivery of cost • Relentless focus on controllable cost base r
Slide 35: Residential: A sustainable business
British Gas Residential A sustainable business Customer • Churn lower than industry average, market share growth Growth Customer • Lower complaints, NPS improvement, highly motivated people, Service No. 1 for customer satisfaction Operating • Lowest operating costs per account in 2010, effective bad
Slide 36: Chris Jansen, Managing Director, British Gas Services
Chris Jansen Managing Director, British Gas Services J a 36 BritishGas Centrica Looking after your world
Slide 37: Services: Business overview
British Gas Services Business overview 2010 Turnover Customer Areas of focus (£m) Accounts • Cost and labour efficiencies Service & Repair • Final salary pension changes 845 4.7m (Boiler Maintenance) • 8m energy customers • Landlord sector • Cost efficiencies Central Heating Installations 124k 324 •
Slide 38: Responding to meet our customers' needs
British Gas Services Responding to meet our customers‟ needs Customer needs British Gas response High Quality Service • Same day service, first time fix and parts capability Service Excellence reducing churn Value For Continuous • Engineer productivity, pensions and buying scale Money Efficiency red
Slide 39: Engineer led customer service is at the heart of our proposition
British Gas Services – Service Excellence Engineer led customer service is at the heart of our proposition Service level capability Engineer Service Typical British Gas Competitor Engineer NPS 2009 2011 Call outs p.a. Unlimited Two + Same day service 90% + Not offered British Gas 54 59 Accidental da
Slide 40: Reducing customer churn in a competitive environment
British Gas Services – Service Excellence Reducing customer churn in a competitive environment First Time Fix and Complaints Customer Churn 74% 30 16% 80% 14% 70% Complaints / 1000 customers 72% Annual churn % 60% First time fix % 12% % of jobs completed 70% 25 10% 50% 68% 8% 40% 6% 30% 66% 20 4% 20
Slide 41: Growing installations around service excellence and segmentation
British Gas Services – Service Excellence Growing installations around service excellence and segmentation Central Heating installation growth Segmentation and innovation 10 17% Average Monthly Installations (’000s) 16% British Gas Market Share % 9 15% 8 14% 13% 7 12% 6 11% H1 09 H1 10 H1 11 • Diffe
Slide 42: Operational efficiency to maximise benefits of direct labour
British Gas Services – Continuous Efficiency Operational efficiency to maximise benefits of direct labour Service & Repair: engineer productivity Central Heating installations: and Annual Service Visit backlog engineer efficiency 8.4 300 75 Engineer productivity Installations per direct engineer p.a
Slide 43: Leveraging procurement scale to minimise costs
British Gas Services – Continuous Efficiency Leveraging procurement scale to minimise costs • 5 year strategic relationships • Competitive commercial terms • Joint product development • Unique deals for British Gas customers • New technology collaboration • Five year deal with Travis Perkins – £25m
Slide 44: Working with GMB to transform the business
British Gas Services – Continuous Efficiency Working with GMB to transform the business Negotiated T&C changes instrumental to GMB support critical to achieving enable ‘Customer Promise’ proposition resolution to pensions Previously Post Changes • Cap on pensionable pay rises Winter hours 40 45 (per
Slide 45: Leveraging insurance capabilities to broaden our product range
British Gas Services – Product Diversity Leveraging insurance capabilities to broaden our product range Transition to insurance Bundling 1,200 100% 100% 5 400 Cumulative Energy Extra sales (‘000s) % of customer base on insurance 1,000 Weekly Energy Extra sales (’000s) 80% Gross Written Premium (£m)
Slide 46: Reinforcing the breadth and depth of our product range
British Gas Services – Modern Brand Reinforcing the breadth and depth of our product range 46
Slide 47: Utilising technology to attract and retain customers
British Gas Services – Modern Brand Utilising technology to attract and retain customers Services online growth ‘Track Your Engineer’ Remote heating control 1,600 60% Online customers as % of total base Online transactions („000) 1,200 45% 800 30% 400 15% 0 0% 2009 2010 2011E 2012E • 14% of all jobs
Slide 48: Creating new revenue streams in adjacent markets
British Gas Services – New Channels and Markets Creating new revenue streams in adjacent markets Sainsbury’s • Exclusive partnerships to distribute services products • Awarded five contracts for private sewer transfer Water • Annual contract revenues of up to £15m per annum companies • In advanced d
Slide 49: Services: Double digit growth in a challenging market
British Gas Services Double digit growth in a challenging market Service • Leading in service excellence underpinned by quality of engineers Excellence Continuous Efficiency • Lower costs through efficiency, scale and partnerships Product Diversity • Insurance transition supporting broad and diverse
Slide 50: Phil Bentley, Managing Director, British Gas
Phil Bentley Managing Director, British Gas J . 50 BritishGas Centrica Looking after your world
Slide 51: Leading business model leaves us well placed to seize market opportunities
Leading business model leaves us well placed to seize ongoing market opportunities • Maintaining profits BGR – cost advantage, industry leading retention, deeper customer relationships • Steady double digit profit growth BGS – attractive propositions, cost control, productivity improvements • Near t
Slide 52: Breakout sessions
“hig after _ ~ Str World a ica 52 British Gas Looking after your workd
Slide 53: Ian Peters and Kanat Emiroglu, British Gas Business
lan Peters and Kanat Emiroglu British Gas Business J a 53 BritishGas Centrica Looking after your world
Slide 54: Business: Small Enterprises
British Gas Business Small Enterprises Increasing the value of Segment focus our customer mix • A call centre delivering simple and quick customer service % customer gains / losses • Online sales and email for out of hours service Gains • Fair and transparent pricing delivering peace of Losses mind
Slide 55: Business: Medium Enterprises
British Gas Business Medium Enterprises Account management driving Segment focus existing customer sales • Dedicated customer account management +23% • Energy experts providing solutions to manage costs • Swift resolution of problems • Delivering value for money 53 • New channel development to reach
Slide 56: Business: Multi Sites
British Gas Business Multi Sites Increasing achieved % margins Segment focus through focus on Multi Sites • Multi-disciplinary hubs delivering customer service +150% • Clear options for product, service and risk offerings • Efficient query resolution and billing accuracy • Energy management services
Slide 57: Meeting the differing needs of customers in three selected segments
British Gas Business Meeting the differing needs of customers in three selected segments Customers Sites Revenue Profit (000‟s) (000‟s) (£m) (£m) • Tailored propositions for 690 1,044 2,907 233 Multi Site customers served by multi-disciplinary hubs • Differentiation through value added services in M
Slide 58: Our segmented model has brought growth ahead of expectations
British Gas Business Our segmented model has brought growth ahead of expectations Strong operating profit growth Drivers of growth 250 2009 • Focus on economic value growth – acquisitions from existing customers (40%) 200 target – high contract renewals – cost reflective pricing Operating Profit (£m
Slide 59: Positioning for long term growth
British Gas Business Positioning for long term growth Near term flattening of profits . . . driving long term growth during investment phase . . . • Reducing costs – investment to leverage BGR systems • New propositions and „pull‟ channels – investment in Smart, Online, Marketing Transform propositi
Slide 60: Reducing costs: Investment to leverage BGR systems
British Gas Business Reducing costs: Investment to leverage BGR systems Leveraging BGR expertise & capabilities Reducing bad debt £m • Already realised synergies in debt c. 15% Bad debt – increased field visit capacity by 60% through merged % of in-house collection teams revenue – increased collecti
Slide 61: New propositions and 'pull' channels: Multi site menu proposition
British Gas Business New propositions and „pull‟ channels: Multi site menu proposition Multi site menu propositions Service & Product Risk • Simplified products, risk and service Reporting • Better contracted and actual margins Fixed Price Low Risk Megawatt – customers actively choosing Industry cos
Slide 62: Smart enabled online ME proposition
British Gas Business New propositions and „pull‟ channels: Smart enabled online ME proposition Energy Insight: A unique and smart enabled analytics tool • Analysis of smart metering data • 30% of BGB‟s Medium Enterprise customers have smart electricity meters • Online energy dashboard with analytics
Slide 63: New marketing and propositions
British Gas Business New propositions and „pull‟ channels: New marketing and propositions • New campaign targeting high priority industry sectors • Aligned with Energy Insight • Building on Smart meter lead • Industry focused propositions • Strong link with energy services • Unlock new channels in l
Slide 64: Growing B2B Energy Services
British Gas Business Growing B2B Energy Services Recent investments and capabilities . . . . . . delivering top line growth Revenue Energy Insight (£m) 90 80 Smart metering 70 Installation and maintenance of 60 ~50% commercial boilers and electrical systems 50 40 Energy and building management solut
Slide 65: Well positioned for growth in UK's B2B energy and services markets
British Gas Business Well positioned for growth in UK‟s B2B energy and services markets • Leading energy supplier to UK businesses (0.7m customers, 1m sites) Customers • Public sector opportunities via Local Authorities and Communities • Focus on profitable but difficult to serve Multi sites Skilled
Slide 66: Gearoid Lane, British Gas New Markets
Gearoid Lane British Gas New Markets J . 66 BritishGas Centrica Looking after your world
Slide 67: New Markets: Market opportunity
British Gas New Markets Market opportunity • Imperative to transform energy efficiency in Britain‟s homes and businesses • Substantial growth in demand for insulation and energy related services • Commercialisation of green technologies, e.g. microgeneration • Smart meters leading to home automation
Slide 68: Government policy is driving significant change across the industry
British Gas New Markets Government policy is driving significant change across the industry Insulation Microgeneration Smart metering Social Housing CERT extension - FIT implemented - DECC Prospectus CESP - growing insulation giving strong growth and Spring package - delivering whole market in solar
Slide 69: New Markets – Insulation
British Gas New Markets – Insulation Within two years we have become one of the UK‟s leading insulation companies Opportunity Right to win Early successes • Market worth an estimated • Organic growth Insulation: Revenue £m 140 £1.5bn by 2015 – 1,100 insulation 120 Solid Wall Insulation – c5m cavity
Slide 70: New Markets – Microgeneration
British Gas New Markets – Microgeneration We are building the UK‟s leading low carbon microgeneration business Opportunity Right to win Early successes • Market to grow to £4bn • Supply chain 120 Microgeneration Revenue by 2020 – utilising National £m Renewable Heat 100 – emerging technologies Distr
Slide 71: New Markets – Smart metering
British Gas New Markets – Smart metering Taking a leadership position in the roll-out of Smart metering in the UK Opportunity Right to win Early successes • Market size: all homes and • Technology pioneers 80% businesses – driving industry 70% Gas market share – Government mandate standards 60% Elec
Slide 72: New Markets – Social Housing
British Gas New Markets – Social Housing Public Sector is an important channel to market for growing these businesses Opportunity Right to win Early successes • Significant market worth • Density and diversity Turnover £m 200 £3bn – develop via Mears CAGR 2009-2012: 35% – social housing 20% of partn
Slide 73: Utilising our unique capabilities to lead the low carbon energy services market
British Gas New Markets Utilising our unique capabilities to lead the low carbon energy services market • Energy Market is changing – responding positively by building capability across a range of technologies • Leading positions in rapidly growing markets • Substantial progress has already been mad
Slide 74: Investor Day September 2011
British Gas Investor Day 7 September 2011 J a 74 BritishGas Centrica Looking after your world