Annual Review 2002
British Gas serves millions of customers every day.
Business review 2/5
British Gas
2002 saw progression in the financial performance of the business. This was helped by improved gas margins, continuing growth in electricity and home services and reduced losses in communications. Some of this improvement was due to a reversal of the over-recovery of transportation payments to pipeline operator Transco made in the previous year.
During 2002 we integrated our energy and home services activities to give us greater understanding of our customers, and to increase revenue and operational efficiencies. We are now well placed to offer a wide range of reliable products and services with the aim of becoming Britain’s leading home services provider. We are making major investments to enhance the quality of service we provide to customers. Investing in our staff helps us build durable relationships with our customers, so we are increasing the number of engineers and building up skills and expertise. Our operations will benefit from our investment in customer relationship management (CRM) infrastructure, leading to improved service levels and lower costs.
Residential energy
During the year our share of residential energy customers has remained steady at 40% of the total market. Customer losses reflect a longer term trend of stabilising market share and the rate at which people are switching suppliers has shown signs of slowing down. While we expect the result of this reduced industry churn to be slower growth in our residential electricity customer base than we had previously anticipated, reduced customer acquisition expenses should contribute to better electricity profits. Against this background of lower industry churn, we have still managed to grow our electricity customer numbers by 8%. Our market share for residential gas at the end of the year was around 64%. In residential electricity we estimate our market share at year end was 22%.
We believe selling practices across the energy industry must continue to improve and we have taken a leading role in developing a new code of sales practice, and in removing commission-only sales agents.
We continue to invest in the development of employees.
Key residential energy performance indicators |
|||
| 2002 | 2001 | Δ% | |
| Customer numbers (period end) (000) |
|||
| Residential gas | 12,839 | 13,451 | (4.5) |
| Residential electricity | 5,795 | 5,374 | 8 |
| Estimated market share (%) | |||
| Residential gas | 64 | 67 | (3 ppts) |
| Residential electricity* | 22 | 21 | 1ppt |
| Turnover (£m) | |||
| Residential gas | 3,805 | 4,029 | (6) |
| Residential electricity | 1,380 | 1,121 | 23 |
| Operating profit (£m) | |||
| Residential energy | 218 | 19 | n/m |
*2001:restated to reflect Ofgem market resizing during 2002
Home services
Our home services business grew strongly, with higher revenues from installing and maintaining central heating systems. New services such as home electrical care were also well received. We are the only major energy supplier to deliver such a wide range of services under our own brand using our own people. This gives us a competitive advantage and provides a strong incentive for customers to stay with us.
The number of engineers we employ grew by 13% in 2002 and we have set up the British Gas Engineering Academy to co-ordinate the recruitment, training and development of our engineers throughout the company. Our plan is to train about 5,000 new engineers in the next five years.
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Key home services performance indicators |
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| 2002 | 2001 | Δ% | |
| Customer relationships (period end) (000) |
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| Central heating service contracts | 3,482 | 3,314 | 5 |
| Kitchen appliances care (no. of appliances) | 871 | 562 | 55 |
| Plumbing and drains care | 905 | 743 | 22 |
| Electrical care | 367 | 143 | 157 |
| Home security | 28 | 28 | – |
| Total relationships | 5,653 | 4,790 | 18 |
| Central heating installations | 102 | 109 | (6) |
| Total turnover (£m) | 810 | 722 | 12 |
| Total operating profit (£m) | 61 | 36 | 69 |
British Gas Communications
The efficiency and value of our telecoms business was greatly improved by transferring British Gas call traffic to our One.Tel managed switches. These enable us to use the lowest cost routing for each call. An improved system of carrier pre-selection, which replaces the need to use an adaptor box to route calls, has been introduced as standard with all new connections since July. Initial results have seen an increase in average revenue per customer.
Δ% has been used to express ‘percentage change’
n/m has been used to represent ‘not meaningful’.
Key British Gas Communications performance indicators |
|||
| 2002 | 2001 | Δ% | |
| Customer numbers (fixed line) (period end) (000) |
367 | 400 | (8) |
| Turnover (£m) | 52 | 37 | 41 |
| Operating profit (£m) | (35) | (101) | 65 |
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© Centrica 2003 Disclaimer Annual Report published 25 March 2003