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TRANSCRIPT
An introduction to HomeServe
1 homeserveplc.com
Contents• HomeServe at a glance
• Our business model
• HomeServe today
– Our Business
– Our International Businesses
• Financials
– Results 2016
The Home ofEffortless Service
Before a customer joinsWe’ll make it clear what they’re buying
and what it will do for them
when a customer joinsWe’ll tell them how much they’re paying,what that buys them and how to claim
when a customer becomes a memberWe’ll make life easy for them
when a customer makes a claimWe’ll solve their problem quickly and easily
– their emergency is our emergency
If a customer’s not happyWe’ll listen, say sorry and put things right
wherever we can, as soon as we can
our customer promises
HS07083 Customer Promise_A1 (1).indd 1 16/06/2015 12:21
2 homeserveplc.com
HomeServe at a glance
• FTSE 250 listed company, based in the West Midlands• Market cap. c. £1.7bn• Operations in 5 countries – UK, USA, France, Spain and ItalyHistory • 1993 – Founded as a joint venture with South Staffordshire Water• 1995 – Signed first affinity partnership with Anglian Water• 2001 – Doméo launched - a JV with Veolia in France• 2003 – Entered USA• 2004 – De-merged from South Staffs Water, listed as HomeServe • 2007 – Acquired Reparalia business in Spain• 2010 – Acquired National Grid Energy Services business in USA• 2011 – Acquired full control of Doméo in France• 2012 – UK regulatory issues – no contagion in other markets• 2013 – Continued new partner signings in USA and Spain• 2014 – Solid UK business with over 2m customers• 2015 – New partnership in France - Lyonnaise des Eaux• 2015 – Special Dividend of £99m• 2016 – Aquired Utility Service Partners (USP) in the USA• 2016 – Launch Leakbot in the UK• 2016 – Invest for further international expansion
1 All references to adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), adjusted operating profit or loss, adjusted profit before tax and adjusted earnings per share throughout the report, exclude exceptional items and the amortisation of acquisition intangibles, as reconciled to their statutory equivalents in the Financial Review.
2 All USA KPIs stated after inclusion of USP, a business acquired in June 2016.
Adjusted operating profit1 FY16 £97.3m (2015: £87.8m)
UK £58.0m (2015: £56.4m)
USA £12.1m (2015: £6.4m)
France £23.2m (2015: £23.4m)
Spain £9.9m (2015: £7.5m)
New Markets (£5.9m) (2015: (£5.9m))
Retention 83% (2015: 83%)
UK 82% (2015: 82%)
USA 82% (2015: 82%)
France 89% (2015: 89%)
Spain 77% (2015: 79%)
Customers FY16 7.4m (2015: 6.3m)
UK 2.2m (2015: 2.1m)
USA 2.7m (2015: 2.0m)
France 1.0m (2015: 0.9m)
Spain 1.2m (2015: 1.1m)
New Markets 0.3m (2015: 0.2m)
Affinity partner households 103m (2015: 89m)
UK 24m (2015: 29m)
USA 43m (2015: 26m)
France 15m (2015: 15m)
Spain 15m (2015: 15m)
New Markets 6m (2015: 6m)
Our mission To provide home assistance membership, which frees our customers from the worry and inconvenience of emergencies, repairs and installations.
3 homeserveplc.com
HomeServe today
UK USA France Spain New Markets Total
Started operations
1993 2003 2001 2007 Italy, Innovation, Digital —
Customers (2016) 2.2m 2.7m 1.0m 1.2m 0.3m 7.4m
Repair networkEmployed,
SubcontractFranchised
Employed,Subcontract
SubcontractFranchisedSubcontract
Subcontract —
Employees (2016)
2,800 765 460 700 70 4,795
Revenues (2016) £292m £153m £77m £97m £20m £633m1
Operating Profit(2016)
£58m £12m £23m £10m (£6m) £97m
HomeServe PLC
1 Intersegment £6m. 2 All references to 2016 refer to reported results for the year ended 31 March 2016.
4 homeserveplc.com
Business Model and how it works
Strengths
• Business to consumer (B to C model)• High levels of recurring income• Ability to cross-sell and broaden relationships
• Replicable internationally and proven• Low capital intensity/high cash conversion
* In addition, we also market under the HomeServe name via direct mail in the US and digitally in the UK and USA.
Strong Affinity Partnerships
Marketable households*
103m households*
Comprehensive Products
Customer demand
7.4m customers
Marketing Expertise
Customers & Policies
13.4m policies
Claims and Network
Capability
Customer Satisfaction
Strong ratings in Revoo and Trust Pilot and low level of
customer complaints
Customer Loyalty
Recurring Income
Policy Retention Rate: 83%
We have a unique and successful business model
Value drivers
Delivering (at 31 March 20161 )
1 Adjusted for USP acquisition (June 2016)
5 homeserveplc.com
• Strong affinity partnerships delivered through long-term agreements with utilities and manufacturers
• Over 100 affinity partnerships giving access to 103m households,
• Recent USP acquisition gives access to a further 335 new partners
• HomeServe owns the customer at the point of renewal
• Common goal in driving customer growth
• Generally partners get a risk-free “%” commission (based on the retail premium)
• Partners can make direct sales to Customers, particularly in France and Spain
Value driver – Build strong long-term Affinity Partnerships
Strong Affinity Partnerships
Delivering
Marketable households & brands
®
A COBB EMC AFFILIATESM
6 homeserveplc.com
Policies are underwritten by third party insurers
Burst/leaky water supply lineLeaky/burst pipes or tapsSlow/no drainageClogged drains, sinks and toilets
Water
Electrics
Central Heating
Landlord products
Broken/Faulty wiringFaulty lights, sockets or switchesFuse box issues
Gas leaks, problems, concernsNo heat, no hot water
Plumbing & Drainage PlusHomeServe Cover7Leakbot - connecting the world’s plumbers
Electrical Emergency & Breakdown Cover
Gas Central Heating Breakdown Cover HomeServe Cover8
Landlord Gas Safety Inspection (CP12)Landlords Heating Cover & Boiler Service
Consumer need / Event HomeServe product
Value driver – create products people want to buyOur products fill the gap between the homeowner’s contents and buildings policy and the cause of the emergency
7 homeserveplc.com
Value driver – Sales and marketing know-how
• Insurance minded consumers
• Significant investment in marketing with a multi-channel approach
• Optimise partner sales channels, particularly in France and Spain
SERVICE SENTRY ACCEPTANCE CARD
Dear <<Sample A. Sample>>,What will you do if a major system in your home fails? Making repairs to your heating, hot water, interior gas or electrical lines can cost hundreds of dollars — for instance, replacing the blower motor in your heating system can cost more than $600* alone. Can you afford an expensive repair bill?
Get Protection You Can Afford Now, you can have peace of mind and be prepared with a Service Sentry Protection Plan from HomeServe. Coverage is optional and not required by your local utility or community. Each level of coverage gives you protection against the cost of qualifying emergency repairs with no bills to pay, and unlimited service calls annually. In addition, you’ll receive access to a 24-Hour Emergency Repair Hotline number and a full one-year guarantee on all covered repairs.
Benefits:n Avoid unexpected covered repair costs with unlimited coveragen Prompt, professional service by local, licensed and insured techniciansn Unlimited service callsn Satisfaction guaranteed—all repairs guaranteed for one yearn Services provided by HomeServe, a premier home service and repair companyn 24-Hour Emergency Repair Hotline number available 365 days a year
Comprehensive ProtectionWhy worry about the expense and inconvenience of emergency home repairs? Select the coverage level that’s right for you from our range of affordable plans and rest easy knowing that if a home emergency happens to you—you are covered. Please respond by <<Month Day, 20XX>>.Sincerely,
Michael HalterVice PresidentSouth Jersey Energy Service Plus
Can you afford a high repair bill?
<<Mr. Sample A. Sample>><<Address Line 1 (Mailing)>><<Address Line 2 (Mailing)>><<City, ST 12345-1234 (Mailing)>>
Choose the plan that’s right for you
*HomeServe national average repair costs as of 4/11. No charge for covered repairs.HomeServe USA Repair Management Corp. (“HomeServe”), South Jersey Energy Service Plus (SJESP) and South Jersey Gas are independent companies separate from each other. HomeServe and SJESP are not regulated by the New Jersey Board of Public Utilities. HomeServe provides this optional service under a delegated authority from AMT Warranty Corp., who is your contract issuer. Any decision regarding participation in this service plan will not affect the price, availability or terms of service from South Jersey Gas.
Complete the Acceptance Card, go to http://SJESP.homeserviceplans.com,
or call 1-855-SJE-PLAN (855-753-7526) today. Available: Mon.– Fri 8 a.m.– 8 p.m. | Sat. 10 a.m.– 4 p.m. EST
Please respond by <<Month Day, 20XX>> BEST VALUE15% DISCOUNT
off regular price
SJNJ
x-Sxx
-811
DA
Service Sentry 100SM Plans | SJNJ1-Sxx-811DA $8.98 per month
Service Sentry 200SM Plans | SJNJ2-Sxx-811DA $17.07 per month
Service Sentry 300SM Plans | SJNJ3-Sxx-811DA $24.27 per month10% Discount off regular priceService Sentry 400SM Plans | SJNJ4-Sxx-811DA BEST VALUE!15% Discount off regular price $32.26 per month
YES, please sign me up for the Service Sentry Protection Plan from HomeServe I have selected above and include the monthly charge on my South Jersey Gas bill. I confirm that I have read the enclosed Service Sentry Protection Plan General Product Details & Exclusions and meet the eligibility requirements. I understand that the selected Plan will continue to be billed on a monthly basis unless I discontinue my coverage by calling 1-855-SJE-PLAN. Prices do not include sales tax.
Choose your Service Sentry Protection Plan: Please check the Plan that best meets your needs.
<<Mr. Sample A. Sample>><<Address Line 1 (Service)>><<Address Line 2 (Service)>><<City, ST 12345-1234 (Service)>>
Prepared for
PHONE #
MAILCODE
SJNJx-Sxx-811DA
CUSTOMER REFERENCE NUMBER>><< X X X X X X X X X X X
SIGNATURE (REQUIRED)
Service Sentry 200SM
COVERAGE PLANS INCLUDE PROTECTION FOR• Interior Gas Line• Water Heater Repair • Home Heating System
Service Sentry 300SM 10% DiscountCOVERAGE PLANS INCLUDE off regular pricePROTECTION FOR • Interior Gas Line • Water Heater Repair • Home Heating System • Heating System Preventive Maintenance
Service Sentry 400SM
COVERAGE PLANS INCLUDE PROTECTION FOR• Interior Gas Line • Water Heater Repair • Home Heating System• Heating System Preventive Maintenance• Interior Dryer• Interior Range
Service Sentry 100SM
COVERAGE PLANS INCLUDE PROTECTION FOR• Interior Gas Line • Water Heater Repair
fold @ 10.5”Perf KOs
fold
fold
14” long
folds at 3.5”folds at 3.5”
folds and perfat 3.5”
folds in half7”
Window 4.5”w x 1.125”h
Window placement .375”L x .3”B
Flat size: 8.5” x 14”Finished Size:8.5” x 3.5”Fold: Double Parallel Fold (Folds at 7”, then 3.5”)Color Process:4/0 process
8.5”
SJNJx-Sxx-811DA.indd 1 7/28/11 3:24 PM
Sales and marketing expertise
Delivering
Customer and policy growth
<Title.Intial. Surname> <208x397mm><Address Line 1><Address Line 2><Address Line 3><Address Line 4><Address Line 5><Address Line 6> <Myriad Pro 9pt><Address Line 7>
<Month> 2014
• South Staffordshire Water Plc, Registered Office: Green Lane, Walsall WS2 7PD. Registered in England No. 2662742. • South Staffordshire Water Plc is an appointed representative of HomeServe Membership Ltd, which is authorised and regulated by the Financial Conduct Authority. • HomeServe reserves the right to withdraw this promotion at anytime.
Yours sincerely
Barbara Julye, Head of Customer Engagement, South Staffs Water
Only
£12for the first year
Dear <title.surnamexxxxxxxxxxxxxxxxxxxxxxx>
It goes without saying that you rely on the plumbing and drains in your home in <town> to work day in and day out. But what do you do when they don’t? If an internal pipe bursts or a drain blocks, it’s not only a nuisance but it could be costly too.
For just £12 in the first year, you needn’t worry We pride ourselves on being first for service and like to give our customers value with every drop, that’s why we have teamed up with HomeServe to bring you Plumbing & Drainage Cover. So, whether your problem is big or small you can have peace of mind knowing that expert assistance is just one phone call away and you won’t be left with an unexpected repair bill to pay.
Here are just some of the things this comprehensive plumbing protection would cover you for <title.surnamexxxxxxxxxxxxxxxxxxxxxxx>, even if the problem is caused by wear and tear or accidental damage:
From a leaky tap to a blocked drain, let the experts take care of it
Plumbing & Drainage Cover Sold, arranged and administered by HomeServe and underwritten by Inter Partner Assistance SA
Initial exclusion period, exclusions and terms & conditions apply. Please turn over for more information and details on how to take out cover for <address.line.1xxxxxxxxxxxxxxxxxxxxxx>.
Collapsed drain
Blocked sinks
Burst internal pipe
Non flushing toilet
Leaking overflow
Leaking radiator valves
Seized tap
Leaky flexible hose pipe to washing machine
TYPICAL PROBLEMS
Large, national network of plumbers
UK helpline available 24/7
Cover for up to £4,000 per claim
No limit to the number of claims
Repairs guaranteed for 1 year
No call out fees. Parts, labour and VAT are all included within the generous claims limit
No excess to pay
BENEFITS OF COVER
To pay by direct debit
Working with
<Title. Initial. Surname.><Address Line 1><Address Line 2><Address Line 3><Address Line 4><Address Line 5><Address Line 6><Address Line 7>
BEFORE COMPLETING THIS FORM, PLEASE READ THE IMPORTANT INFORMATION SECTION OVERLEAF.
To pay by direct debit SSSPE1BT
If your details are incorrect, please tick ✓ and amend.
Tel. No. (Home)
Tel. No. (Mobile)
Tick to indicate frequency of first year Direct Debit payment and complete the instruction opposite. ✓1. Direct Debit – Annual £12.00 2. Direct Debit – Quarterly £3.00 3. Direct Debit – Monthly £1.00
Instruction to your Bank or Building Society to pay by Direct DebitReference (for processing use only)
Name of account holder(s)
Name and full postal address of your Bank or Building Society
Branch Sort Code
Bank/Building Society account no.
Please fill in this form using a BLACK pen and send it in the Freepost envelope provided or mail to: Customer Services, Freepost RLYC-LXAL-GEEH, Cable Drive, Walsall WS2 7BN.
Originator’s identification number
Signature(s) ✗ D D M M Y Y
Instruction to your Bank or Building Society.Please pay HomeServe Membership Ltd. Direct Debits from the account detailed in this instruction subject to the safeguards assured by the Direct Debit Guarantee. I understand that this instruction may remain with them and, if so, details will be passed electronically to my Bank/Building Society.
SS
SP
E1B
T (1
2)
Please see overleaf for declaration and other payment methods...
<CACI CUST>
Free boiler service*
When you take out boiler cover with us
Join us at homeserve.comor call 0800 313 4150 quoting HSSGE1S
Boile
r Cov
er fro
m
£3.75 a
mon
th
in the f
irst y
ear
HS06561 Gas Switchers Press insert Free Service A4 (6).indd 1 12/05/2014 15:58
8 homeserveplc.com
Increased marketing investment creates long-term value
• We use a similar marketing model in our businesses
• Investment in customer acquisition results in a negative Yr 1 P&L impact
• All marketing campaigns target at least a three year payback
• Typically USA campaigns payback in around 2 years or less
• A direct correlation between marketing investment and new customer wins
• Income is policy price less underwriting and taxes
• Average customer life of around 5 years, based on 83% retention rate
• Year 1 income can be negative reflecting introductory offers
Cost Customer lifetime income
Maximum investment for 3 year payback
Typical US marketing paybackAcquisition cost
Yr 1
IncomeYr 1
IncomeYr 2
IncomeYr 3
IncomeYr 4
IncomeYr 5
9 homeserveplc.com
• Network provides high quality, scalable service delivery with low levels of capital investment
• Our approach to network management is influenced by volume density in each trade
• Strategy is to use subcontract engineers unless there is sufficient volume to justify employing engineers directly
• Local area network managers focus on contractor recruitment and performance
• Setting up a local network in the USA takes around 8 weeks
Value driver - Claims and network capability
Claims and network capabilty
Delivering
Customer satisfaction and cost effectiveness
Category DirectlyEmployed Franchisee / Subcontract
UKPlumbing & Heating
(c.550 plumbers – nationwide)(c.150 gas engineers – midlands based)
Gas & Electrics, and other trades
USA Heating & Cooling(c. 150 engineers in NE USA)
All trades via local networks
Spain –All trades via national network including a franchise network
France – All trades via national network
10 homeserveplc.com
• Increased product usage and positive customer experience drives retention
• High proportion of annual recurring revenues
– high levels of continuous and electronic payment
– minimal switching to competitors
Value driver - Retain customers to drive recurring income
Customer loyalty
Delivering
Recurring income
France0%
50%
100% 89%
82% 82%
77%
UK USA Spain
Retention rate 2016
by
94of customers would
buy again.
%
Bas
ed o
n 2,
328 real reviews, from custom
ers like you.
11 homeserveplc.com
Typical customer • Typical customer
– Insurance minded
– Home owner
– Over 50 years old
– Generally recruited with a single water, gas or electrical policy and then cross-sold other products
• Similar demographic across the geographies
• Digital marketing introducing a younger demographic
12 homeserveplc.com
• Founded by current group CEO Richard Harpin in 1993• Originally a joint venture with South Staffordshire
Water Company• Offering Home Emergency Cover and repairs to Britain’s homes
• 14 water utility partners – 92% market coverage• 4 Gas boiler manufacturer partners• Develop successful marketing campaigns with our partners
• Main competitor is British Gas (part of Centrica)• Integrated marketing channels including direct mail, digital and
partner channels• One third of policy sales generated through digital channels
• Delivering effortless service to 2.2m customers• Good sales and marketing momentum, acquired 0.4m
customers in FY16• Strong customer retention rate (82%)• Continuous improvements to customer experience with more
self serve options• Encourage customer feedback through Reevoo, TrustPilot and
Rant & Rave• Focus on innovation and leading in Connected Home - Leakbot
connecting the world’s plumbers• A growing heating repair service and installation business
Background
Affinity partners
Market place sales channels
Current focus
£m 2015 2016
Total revenue 286 292
Operating profit 56 58
Operating Margin 20% 20%
Customers (m) 2.1 2.2
Income per customer (£) 93 94
Policies (m) 5.1 5.5
Retention rate 83% 82%
Total no. of UK households (m) 26 26
Total no. of affinitypartner households (m) 24 24
UK – HomeServe
13 homeserveplc.com
A growing heating services business • Acquired Home Energy Services Limited in October 2015
• Directly employed network enhancing our service capability
• Selling Tado smart thermostat with boiler services
Developing boiler installation business • Franchise model
– 14 established franchisees
– National coverage during FY18
• Smart thermostat at point of installation
UK – acquisition enhances gas delivery capability
14 homeserveplc.com
UK – Leakbot: connecting the world’s plumbing
• Smart water leak detector developed in house by HomeServe Labs
• Detects leaks anywhere in the home
• Solves high value problem for home insurance companies - £650m claims in the UK
• Global patent-pending
15 homeserveplc.com
USA – A step change in growth following the acquisition of USP in June 2016. HomeServe USA is our most significant opportunity with 134m households
• Launched in the USA in 2003• Operates across North America and Canada• During 2016 acquired Utility Service Partners (USP) for $75m
bringing 10m partner households, 335 Affinity Partners and 0.4m Customers
• Strong prospects pipeline adding 2.8m households in 2016• Significant growth opportunity with over 1,400 target utilities
Background
• Over 70 utility affinity partners across North America• USP brings over 335 new partners• Mix of water, gas and electric utilities
Affinity partners
• HomeServe USA is the market leader• Around 40 utilities have their own small policy books• We sell our policies principally through direct mail• Market using both affinity partner brands and our own
‘HomeServe USA’ brand
Market place sales channels
• Effective integration of USP• Accelerate new partner signings• Strong pipeline of new partner opportunities• Increasing the penetration of existing partners
Current focus
£m 2015 2016
Total revenue 125 152
Operating profit 6 12
Operating Margin 5% 8%
Customers (m)* 2.0 2.7
Income per customer ($) 94 91
Policies (m)* 3.0 3.9
Retention rate 82% 82%
Total no. of USA households (m) 128 134
Total no. of affinity* partner households (m) 29 43
* Includes USP acquired in June 2016
16 homeserveplc.com
USA: USP acquisition accelerates US GrowthUSP gives us:
• 0.4m customers
• 335 affinity partners covering 9.9m households in the US & Canada
• Incremental $15m EBITDA in FY18
• Proven cost effective model by which to manage municipal channels
• Exclusive arrangement with National League of Cities
• Access to 13m households in Canada
CANADA
USA
USP
USP
USP
HomeServe USA
Utility Service Partners
17 homeserveplc.com
USA – 11 new utility partners in FY16 and strong pipeline
43m
FY13+0.8m households
FY14+4.4m households
FY15+2.5m households
FY16+2.8m households
USP+9.9m households
Households 22m 26m 29m 32m
• 2.8m households added in the year
• Excellent new partner pipeline
18 homeserveplc.com
Households38m
Households90m
Households65m
Households63m
Energy utilities Water utilities
2,600Serving < 50,000
households
145Serving > 50,000
households
1,300Serving > 20,000
households
52,700Serving < 20,000
households
Target Market
Significant growth opportunity – 134m households and 1,445 utilities
19 homeserveplc.com
USA - target is 80m households
50k+ 735 150 400268m* 105m 14m 43mProspects Prospects Prospects PartnersHouseholds Households Households Households
* USA households 134m, serviced by water and energy service providers
Total propects
Live proposals
Advanced negotiation
Contract signed
20 homeserveplc.com
USA target 8m customers and 20% margin
March 2016 July 2016 (incl. USP)
US in the Future
AP Households 32m 43m 80m
Penetration 7% 6% 10%
Customers 2.3m 2.7m 8.0m
Income per Customer $91 - $100
Operating Margin 8% - 20%
Today we could be a low-growth +20% margin business with 2.7m customers…
…but tomorrow we would rather be a 20% margin business with 8m customers
21 homeserveplc.com
France – a high quality business
• Set-up as Joint venture with Veolia in 2001 – 51% Veolia, 49% HomeServe• December 2011 – HomeServe bought Veolia’s 51% for £83m • Signed Lyonnaise des Eaux, 2nd largest water provider in 2015
Background
• Strong partnership with Veolia• Use Veolia’s brand to market to both Veolia and non-Veolia
customers across France• During 2015 signed an agreement with Lyonnaise des Eaux (LDE),
serving 5.3m households
Affinity partners
• No direct competitors in France• A few utilities have their own small policy books• We sell our policies using a combination of – Direct mail – Outbound telephony – Sales through Partner Call centres
Market place sales channels
• Continued penetration of the Veolia territory• Develop marketing activity with LDE• Invest in new partners and innovation
Current focus
£m 2015 2016
Total revenue 75 77
Operating profit 23 23
Operating Margin 31% 30%
Customers (m) 0.9 1.0
Income per customer (€) 101 101
Policies (m) 2.3 2.3
Retention rate 89% 89%
Total no. of French households (m) 25 25
Total no. of French partner households (m) 15 15
22 homeserveplc.com
Spain - Reparalia a growing membership business
• Acquired Reparalia repair network in 2007• Two parts to our Spanish business: – Claims handling operation for a number of Spanish
insurance companies – Membership business – selling home assistance policies
• Continue to work with Spain’s largest energy provider, Endesa• Prospecting new partnerships
• No competitors in the plumbing or electric sectors. A few utilities have gas policy books
• We sell using a combination of – Sales through our Partners’ call centres – Outbound telephony
• Continued customer growth acquired through our relationship with Endesa
• Investment in business, developing and bringing on new partners
Background
Affinity partners
Market place sales channels
Current focus
£m 2015 2016
Membership revenue 29 37
Claims handling 62 60
Total revenue (£m) 91 97
Operating profit (£m) 8 10
Operating Margin 8% 10%
Customers (m) 1.1 1.2
Policies (m) 1.3 1.4
Total no. of Spanish households (m) 17 17
Total no. of Spanish partner households (m) 15 15
23 homeserveplc.com
New Markets – developing and extending into new territories
Italy
• 0.3m customers and into profit
• Focus on long term agreement and new partnerships
New territories
• Open via a utility joint venture, replicating success in UK and France
• Prospecting will cover 13 countries: Australia, Brazil, Chile, China, Czech Republic, India, Japan, Mexico, Netherlands, Poland, Turkey, South Korea, Taiwan
24 homeserveplc.com
Financials - 2016Year end 31 March 2016
25 homeserveplc.com
Revenue Adjusted operating profit£million FY16 FY15 ∆% FY16 FY15 ∆%
UK 291.8 285.5 +2% 58.0 56.4 +3%
USA 152.6 125.3 +22% 12.1 6.4 +89%France 77.4 74.9 +3% 23.2 23.4 -1%Spain 97.5 90.9 +7% 9.9 7.5 +33%
Established International 327.5 291.1 +13% 45.2 37.3 +22%
New Markets 20.1 13.8 +46% (5.9) (5.9) – Inter-segment (6.2) (6.2) – – – –
Group 633.2 584.2 +8% 97.3 87.8 +11%
• UK profits up 3% to £58.0m
• Increase in profit in the USA reflecting higher customer numbers with continued investment in marketing and business development
• Good performance in France, up 7% in local currency but impacted by adverse currency movement
• Profit progression in Spain reflects an increase in renewals
• Continued investment in New Markets
Divisional financial performance
26 homeserveplc.com
Net Debt 31 March 2015
Adjusted EBITDA
Non-cash items
Working capital
Capital expenditure
Special dividend
Ordinary dividend
Tax Acquisitions Interest/other
Net Debt 31 March 2016
£122.7m£64.1m
£5.1m £6.1m
£63.7m
£99.4m
£37.6m
£17.3m
Cash generated by operations £121.7m
Total dividend £137m
• Increased debt following payment of special dividend of £99.4m; total dividend £137m
• Capital investment of £63.7m in technology and partner payments
• Investment in working capital reflecting continued growth in the business
• Strong cash conversion at 125% of adjusted operating profit
• Acquisition of a gas services business in the UK
• Closing net debt at £169.5m, 1.4x Debt: EBITDA
Cash flow performance – strong cash generation
£5.3m £3.8m £169.5m
27 homeserveplc.com
18
4044
20
20
1035
20
15
10
£58m
£64m
£30m
£55m
£25m
FY15 FY16 FY18FY17 FY19
Capital investment (£m)
Plan
Underlying/Technology
Partner payments
• FY16 capital expenditure
– Core customer IT system
– Partner payments in Spain and France
– Underlying technology
• Benefits from our new customer system
– Single view of the customer
– Improve marketing effectiveness
– Reduce cost to serve
• Continued investment in FY17 and FY18
– Complete implementation of core customer system
– Upgrade claims handling and deployment systems
– Digital and technology investment
– Continued partner payments
• Normalised underlying capex of £25m (including £10m partner payments)
Capital investment – driving customer service and efficiency
28 homeserveplc.com
Appendices• Divisional KPIs
• Divisional results local currency
• Group balance sheet
• Group cash flow
• Our financial business model
29 homeserveplc.com
Divisional KPIsUK 2016 2015 Change
Affinity partner households m 24 24 –Customers m 2.2 2.1 +3%Income per customer £ 94 93 +1%Policies m 5.5 5.1 +8%Policies per customer 2.5 2.4 +4%Retention rate % 82 83 -1ppt
France 2016 2015 Change
Affinity partner households m 15 15 –Customers m 1.0 0.9 +7%Income per customer € 101 101 –Policies m 2.3 2.3 +3%Policies per customer 2.3 2.6 -12%Retention rate % 89 89 –
USA 2016 2015 Change
Affinity partner households* m 43 29 +14%Customers* m 2.7 2.0 +17%Income per customer $ 91 94 -2%Policies m 3.5 3.0 +17%Policies per customer 1.5 1.5 –Retention rate % 82 82 –
*Includes USP acquired in June 2016
Spain 2016 2015 Change
Affinity partner households m 15 15 –Customers m 1.2 1.1 +11%Income per customer € 41 34 +22%Policies m 1.4 1.3 +10%Policies per customer 1.2 1.2 –Retention rate % 77 79 –
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Divisional results – local currency
UK P&L 2016 2015 Change
Total revenue £m 291.8 285.5 +2%
Operating costs £m (233.8) (229.1) +2%
Adjusted operating profit £m 58.0 56.4 +3%
Adjusted operating margin % 20% 20% –
France P&L 2016 2015 Change
Total revenue €m 105.0 96.1 +9%
Operating costs €m (73.6) (66.6) +11%
Adjusted operating profit €m 31.4 29.5 +7%
Adjusted operating profit margin % 30% 31% -1ppts
USA P&L 2016 2015 Change
Total revenue $m 228.4 199.8 +14%
Operating costs $m (210.9) (190.1) +11%
Adjusted operating profit $m 17.5 9.7 +81%
Adjusted operating profit margin % 8% 5% +3ppts
Spain P&L 2016 2015 Change
Total Revenue €m 132.8 115.9 +15%
Operating costs €m (118.9) (106.4) +12%
Adjusted operating profit €m 13.9 9.5 +46%
Adjusted operating profit margin % 10% 8% +2ppts
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Group balance sheet
£ million 2016 2015
Non-current assetsGoodwill 247.7 236.6Other intangible assets 210.0 166.5Property, plant and equipment 34.9 31.3Investments 7.8 4.4Deferred tax assets 6.8 9.5Retirement benefit assets 2.1 0.1
509.3 448.4
Current assetsInventories 2.9 0.8Trade and other receivables 367.7 318.8Cash and cash equivalents 54.2 74.7
424.8 394.3Total assets 934.1 842.7
Current liabilitiesTrade and other payables (360.7) (308.2)Current tax liabilities (7.0) (7.1)Obligations under finance leases (0.9) (0.6)Bank and other loans (25.0) –
(393.6) (315.9)Net current assets 31.2 78.4
Non-current liabilitiesBank and other loans (196.5) (137.6)Other financial liabilities (5.6) (2.1)Deferred tax liabilities (20.5) (18.0)Obligations under finance leases (1.3) (0.6)
(223.9) (158.3)Total liabilities (617.5) (474.2)Net assets 316.6 368.5
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Group cash flow
£ million 2016 2015
Operating profit 86.9 79.1
Depreciation, amortisation and other non cash items 40.9 36.4
Decrease in exceptional provision – (7.7)
Increase in working capital (6.1) (13.2)
Cash generated by operations 121.7 94.6
Net interest (3.0) (4.1)
Taxation (17.3) (22.8)
Capital expenditure (63.7) (52.8)Repayment of finance leases (0.5) (0.3)
Free cash flow 37.2 14.6
Purchase of investment (0.5) (4.8)
Acquisitions (5.3) (1.1)
Equity dividends paid (137.0) (36.9)Issue of shares 1.8 3.8
Net movement in cash and bank borrowings (103.8) (24.4)
Impact of foreign exchange (0.7) 2.3Movement on finance leases (0.9) 0.3
Opening net debt (64.1) (42.3)
Closing net debt (169.5) (64.1)
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£200m
£11m
£82m
£293m
£58m
Our financial business model
Our UK business model 2016 (graph not to scale)
Gross revenue
IPT Underwriting Net revenue
3rd party claims
handling and other income
Repair network revenue
Reported revenue
AP comms
Marketing costs
Call centres
Overheads Repair network
costs
Adjusted operating
profit
34 homeserveplc.com
This presentation contains certain forward-looking statements, which have been made in good faith, with respect to the financial condition, results of operations, and businesses of HomeServe plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. The statements have been made with reference to forecast price changes, economic conditions, the current regulatory environment and the current interpretations of IFRS applicable to past, current and future periods. Nothing in this presentation should be construed as a profit forecast.