an introduction to homeserve plc
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An Introduction to HomeServe plc June 2010 1 Contents - PowerPoint PPT Presentation

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An Introduction to HomeServe plc June 2010 1 Contents Introduction; Our business model HomeServe today Our UK Business Our International Businesses Financials Summary Appendix Contacts 2

  1. An Introduction to HomeServe plc June 2010 1

  2. Contents • Introduction; Our business model • HomeServe today – Our UK Business – Our International Businesses • Financials • Summary • Appendix • Contacts 2

  3. Introduction and our Business Model 3

  4. An international home emergency and repairs membership business • Home emergencies happen to everyone – 17.6m a year in the UK: – typically not covered by existing home insurance policies Worldwide market need – typically not the responsibility of the Utility company • Consumers want peace of mind, excellent customer service and guaranteed work • Our vision “ To be the first place people turn to for home emergencies and repairs ” • “ To provide a membership service which frees our customers from the worry Our mission and inconvenience of home emergencies and repairs ” Sales and Claims and Attractive Strong Affinity Product Customer Marketing Network Partnerships Design Loyalty business model Capability Management 4

  5. HomeServe at a glance Total Revenue* FY10 £369m • Offers a dedicated membership service, giving homeowners fast, 24 hour access 7% to expert engineers in an emergency 16% • “Business to Consumer” focussed • Head office in Walsall with operations across the UK, France, Spain, Belgium and the USA with 3,254 employees 77% • Strong track record of growth Operating Profit* FY10 £104.4m 1% 7% Policies (m) Profit before tax* (£m) 10.3 100.6 9.2 88.7 8.1 7.1 70.6 5.7 51.6 92% 40.5 UK Continental Europe 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 USA 5 *Continuing operations - excluding amortisation of acquisition intangibles, joint venture taxation and exceptional operating items

  6. HomeServe – our evolution 6

  7. HomeServe today HomeServe USA UK Continental Europe USA CEO – Jon Florsheim CEO – Rachael Hughes CEO – Jonathan King France Spain Belgium Started 2001 – Domeo 1993 2009 – SFG 2006 2008 2003 operations Affinity partner 20.3m 1 23.4m 14.3m 10.0m - households Customers 3.2m 769k 79k - 580k Policies 7.6m 1.9m 94k - 756k Repair Employed, network Subcontract Subcontract Subcontract Subcontract Subcontract Employees 2,726 541* 280 5 182 Revenues £287m £36.8m** £46.9m £2.8m £25.7m Operating £95.8m £6.4m*** £0.4m £0.4m £1.5m profit 7 *Includes employees in Domeo joint venture ** Includes just HomeServe share of JV total revenue ***Includes just HomeServe share of the JV operating profit 1 Includes 5.3m households from SoCalGas and 5m households from National Grid USA

  8. Our business model’s value drivers Value Drivers Sales and Claims and Customer Product Strong Affinity Marketing Network Loyalty Design Partnerships Capability Management Customer Affinity Recurring and policy households Income growth + 12% Strong retention performance >83% +23% + 8% 10.3m 68m* 83.6% 83.7% 56m 9.2m 4.7m 4.3m Marketable Households Customers Policies Global Policy Retention Rate 2009 2010 2009 2010 8 2009 2010 *Includes 5m households from National Grid and 5.3m households from Southern California Gas

  9. Value driver - Build strong long term affinity partnerships Strong Affinity Partnerships Customer Loyalty Delivering Marketable households and brands • Strong affinity partnerships delivered through long-term, exclusive agreements with utilities and manufacturers • Over 60 partnerships in 4 countries giving access to 68m households • HomeServe owns the customer at the point of renewal • Common goal in driving customer and policy numbers • Partners get a risk-free fixed “%” commission (based on the retail premium) 9

  10. Value driver – Create products people want to buy Product design Delivering Customer demand with attractive product economics • Create relevant home assistance products which stimulate demand • All policies are fully underwritten by a third party insurer • Drive income per customer by creating suites of complimentary products eg. Combined Policies in the UK 10

  11. Value driver – Sales and marketing know-how Sales and marketing capability Delivering Customer and policy growth • Significant investment in marketing through direct mail and outbound telephony • Highly effective use of data, contact strategy, proposition and promotion • Sharing best practice across the different countries • Close monitoring of the cost of acquisition / return on investment by campaign • Increase policies per customer through cross sell 11

  12. Value driver - Claims and network management skills Where volume Core strategy Claims and is sufficient network management Directly Category Franchisee Subcontract Employed PEST, Locks, Glass UK Plumbing Gas & Electrics Delivering and other trades All trades via national France - - network Customer All trades via local USA Heating & Cooling* - satisfaction networks and cost effectiveness > 100 across multiple All trades via national Spain - trades network All trades via national Belgium - - network • Our approach to network management is influenced by volume density (throughput) in each trade • Strategy is to use subcontract engineers unless there is sufficient volume to justify employing engineers directly (eg. Plumbing & Drains in the UK) 12 * US acquires directly employed service technicians following acquisition of National Grid

  13. Value driver - Retain customers to drive recurring income Strong retention rates 2010 Customer loyalty 82.5% Delivering 83.7% 83.6% 88.3% Recurring income 82.6% • High proportion of annual recurring revenues • New initiatives introduced in the UK in 2010 to improve retention – personalised renewal letters – customer magazine • USA retention rate increasing - as more utilities allowing us to bill the customer via the utility bill • Trade off between pricing alongside product enhancements and retention 13

  14. Our UK Business 14

  15. Our customers • Insurance minded, home owners, typically over 50 years old • Product holdings: – average 2.32 products – generally recruited via a plumbing related policy and then cross-sold other products – 17% of customers hold a ‘Combined Policy’ with an average of 5.8 products per customer • Payment methods Non Continuous Continuous payments Eg. Direct Debit 15

  16. A resilient and growing UK business 2.32 • 23.4m affinity partner households, 90% of UK 2.23 2.08 1.92 households 7.6 7.1 6.6 6.0 • Affinity partner household penetration up to 13.9% (2009: 13.5%) with 3.2m customers 1.7 1.7 1.8 1.8 • Continued growth in affinity relationships 2007 2008 2009 2010 – new deals with Dyson and GB Oils New Policies Sold (m) Policies (m) Policies Per Customer – good progress in renewing existing partners Policies (m) 2010 2009 Change • Achieved a 3% increase in customers in FY Plumbing & Drains, Water Supply Pipe 4.18 4.10 Electrics 0.78 0.77 2010 Gas and Gas Supply Pipe 0.84 0.85 Manufacturer Warranties 0.39 0.33 Other 1.37 1.01 • Targeting 3-4% customer growth in 2011 Total Policies 7.55 7.06 +7% Customers (m) 3.26 3.16 +3% Retention rate (%) 82.5 83.0 -0.5ppts Income per customer (£) 74 65 +14% 16

  17. Retention a key area of management focus UK 12 month rolling retention rate (%) 84.5% 82.5% Mar-08 Mar-09 Mar-10 • Achieved 82.5% retention rate in 2010 ahead of our original expectations for the year • Invested in new marketing initiatives and improved operational management – Customer magazine introduced in FY 2010 – Digital printing to personalise renewals mailings – Invested in call centre soft skills 17

  18. Significant growth potential in the UK Market Opportunity Customer Insights Growth Initiatives Total UK Households 25.9m Reasons for not purchasing cover: • It won’t happen to me • Cost/risk doesn’t stack up Landlords Credit card • Covered by household insurance 10.1m • New home • Haven’t got round to it Owner Occupied Properties But it will happen to you: Oil Travel UK annual repairs (insured and uninsured) Electrical breakdown 6.6m 7.5m Central heating breakdown 4.5m Break in/Lock, boarding up 2.7m Rented Energy Flats Properties Plumbing & Drainage/Water supply pipe 2.4m Electrical wiring 0.9m Pest 0.5m 17.6m 70% of these repairs are uninsured UK Households with NO home emergency cover One Contact IFA’s Water Company estimates and research 18

  19. Good progress on customer growth initiatives One Contact Landlords • ‘One Contact’ – Our ‘Pay on Use’ service and conversion to membership • Acquired ReactFast in 2009 - provides an excellent source of new • New product launched for rental market customer leads and emergency jobs • Direct advertising in the national press • Focused on maximising the number of emergency jobs and new customer leads • Partner discussions underway to maximise distribution and take up rates • Increasing conversion rate from pay on use customers to members 19

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