Highlights Continuing Operations 2006 2005 Increase Revenue £367m £221m 66% Operating profit* £54.4m £42.2m 29% Profit before tax* £53.6m £41.9m 28% Earnings Per Share * 59.2p 47.2p 25% Dividend Per Share 20.0p 16.0p 25% * Excluding amortisation of acquisition intangibles and 2005 exceptional cost 1
Record Year for Policy Membership and Emergency Repair Policy Membership • UK policies increased by 30% in 12 months to 4.97m, 15% in 6 months • Customers increased 22% to 2.79m • International policies increased by 75% to 0.55m (31 March 2005: 0.32m) • Signed a 5 year marketing agreement in US with Cobb Energy and extended existing territories with Aqua America • French operation delivering good returns • Agreement to test in Spain in September Emergency Repair • Brought together comprehensive range of trades; acquisitions in permanent repair, fire and flood and glazing • First outsource multi trade contract performing well • Turnaround programme for ‘Highway’ complete 2
Profit and Loss – Continuing Operations Year Ended 31 March 2006 ê % £’million 2006 2005 Revenue 367.0 220.7 66% Operating Profit 54.4 42.2 29% Interest (0.8) (0.3) Profit Before Tax 53.6 41.9 28% Tax (16.6) (12.7) Earnings 37.0 29.2 26% EPS 59.2p 47.2p 25% • Proposed final dividend of 13.9p, bringing total for year to 20.0p, up 25% • Share scheme charges £2.1m (2005: £1.0m) All figures before exceptional items and amortisation of acquisition intangibles 3 - Exceptional operating cost of £2.8m re Courts in 2005 - Amortisation of acquisition intangibles of £3.6m (2005: £0.3m)
Revenue and Operating Profit £’million 2006 2005 ê % ê % Revenue Operating Turnover Operating Profit Profit Policy 161.4 26% 41.3 9% 128.2 37.7 Membership Emergency Repair 218.1 118% 13.1 192% 100.2 4.5 Inter-Division (12.5) - (7.7) - 367.0 66% 54.4 29% 220.7 42.2 Margins 2006 2005 • Acquired profits contributed £3.8m, 9% of growth Policy 25% 29% • Margin reflects international, retail warranties and greater mix of Repair 6% 4% repair revenue Group 15% 19% 4
Policy Membership £’million 2006 2005 Revenue ê % Operating ê % Turnover Operating Profit Profit Policy Membership 161.4 26% 41.3 9% 128.2 37.7 • Underlying profit growth of 20% for Homeserve GB Average cost of acquisition stable • International investment increased to £2.6m (2005: £1.1m) French Joint Venture operating profit increased to £1.6m (our share £0.8m) • Retail Warranties loss £1.5m (2005: £1.4m profit) Reduced cost base, focus on new customer accounts 5
Emergency Repair £’million 2006 2005 Revenue ê % Operating ê % Turnover Operating Profit Profit Emergency Repair 218.1 118% 13.1 192% 100.2 4.5 • Organic growth of 106% including Homeserve Property Repairs • Chem-Dry and Improveline revenue and operating profits of £64m and £3.9m • ‘Highway’ recovery complete 6
Cash Flow and Balance Sheet Extracts Cash Flow £’million 2006 2005 Increase in working capital (4.2) (5.4) Cash generated by continuing operations 55.6 42.9 Capex (15.7) (7.8) Acquisitions/Disposals (36.0) (1.2) Purchase of own shares (8.2) (8.4) Net (Debt)/Cash (16.3) 11.2 Balance Sheet £’million 2006 2005 Net Assets 201.1 176.9 7
8 Homeserve “The AA for Home Emergencies”
A Record Year for Utility Branded Policy Growth 6000 2 1.78 New Policies sold in Year 1.8 1.65 4973 5000 1.5 1.6 Year End Policies 1.4 1.4 1.22 3816 4000 Policies per Customer 1.2 2926 3000 1 2392 0.8 1844 2000 1626 0.6 1361 928 0.4 858 1000 593 0.2 0 0 '01/02 '02/03 '03/04 '04/05 '05/06 9
30% Annual Growth in UK Utility Branded Policies Policies – UK March March Annual £’million 2006 2005 Increase Plumbing and Drains, Water Supply Pipe 3.35m 2.76m 21% Electrics 0.76m 0.60m 27% Gas and Gas Supply 0.42m 0.25m 65% Other including Housebuilders 0.44m 0.21m 122% Total 4.97m 3.82m 30% 10
The Plumbing and Drains Opportunity • • 48% of homes suffer plumbing emergencies † 42% do not work evenings or weekends • • Only 56% offer an emergency service † 2.8 million plumbing and drains emergencies predicted each year • Out of hours incurs substantial premiums † 11 † Hirst Research 2005
Continued Market Growth Driven by Homeserve Plumbing Electrics 25% Penetration of owner occupied households 12% 20% Total Market 10% Total Market 15% Homeserve 8% 6% 10% British Gas 4% 5% Homeserve 2% British Gas 0% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 Examples of penetration by Water Company 12
Understanding Customer Retention and Cross Selling Opportunity 3.00 96.0% Retention Rate (P&D)* 94.0% 2.50 Average Number of Policies 92.0% Retention Rate (P&D) 2.00 90.0% Average Number of Policies 1.50 88.0% 86.0% 1.00 84.0% 0.50 82.0% 0.00 80.0% 1 2 3 4 5 6 7 8 9 10 11 Length of time a Homeserve Member (Years) 13 * Full Plumbing and Drains product
France is First International Country into Profit Policies - France March March Annual ‘000 2006 2005 Increase Plumbing and Drains 117 71 65% Water Supply Pipe 252 198 27% Electrics and Other 47 11 327% Total 416 280 49% 14
USA Progressing Well Policies - USA March March Annual ‘000 2006 2005 Increase Plumbing and Drains 33 10 230% Water Supply Pipe 94 23 300% Electrics and Other 1 - - Total 128 33 297% 15
USA – Opportunity and Pipeline Development Meeting Proposal Advanced Contract Pipeline Snapshot Total Contacted Prospects Completed Submitted Negotiation Signed May 2006 Utilities / 40 (6.54m) 35 (5.31m) 31 (4.72m) 6 (1.88m) 2 (0.87m) 4 (1.0m) Water Households: 129 (8.7m) Utilities / 186 (78.0m) 111 (56.62m) 39 (24.46m) 5 (6.80m) 3 (2.76m) 1 (0.4m) Energy Households: 119 (64.9m) 16
International Development - Spain Total Utility Prospects 12 British Citizens Second Homes 1.0m Total Owner Occupied Homes 11.6m 17
Retail and Manufacturer Warranties Retail Warranties • Loss of £1.5m (2005: operating profit £1.4m) • Cost base reduced and focus on winning new accounts, e.g. Reids May 2006, 32 stores Manufacturer Warranties • Extended warranties grown 60% to 144,000 • Increased warranty registration rates through innovative marketing • Significant cross sell opportunities 18
The UK’s Largest Multi Trade Repair Service to Household Insurers Revenue and Operating Profit Growth - Emergency Repair Revenue: Profit: £13.1m 250 Permanent Repair Fire and Flood 200 Furniture Gas 150 Profit: £4.5m IDE Profit: £2.7m Plumbing and Drains 100 Glass & Locks 50 - 2004 2005 2006 19
Glass and Locks, Plumbing and Drains • Outstanding performance in the year • Fitter Package at all Glass and Locks branches, • Plumbing and Drains national coverage Pilkingtons • Acquired glazing division in April 2006 Complementary Household Insurers Additional 43 directly employed operatives 20
Permanent Repair, Fire and Flood Market Average Life Cycle Property Repairs Permanent Repair • 100 Homeserve Property Repairs managing 6,000 claims per month 80 • 60 Improveline acquired December 2005 40 Complementary Household Insurers 20 Pilot test with major insurer for property repairs 0 December 2004 March 2005 March 2006 Fire and Flood • Launched trial of carpet inspection, cleaning and replacement with 2 Household Insurers 21
Prospects • Each of our chosen markets has significant potential for organic growth, complemented by acquisitions • Continued market penetration for UK utility branded policies • Further organic growth in US, testing in Spain to commence in September 2006 • Emergency Repair expects to extend proven outsourced multi trade model to other Household Insurers • Increase the proportion of repairs by our employed operatives 22
Appendices 23
Appendix I Balance Sheet 31 March 2006 £’million 2006 2005 Fixed Assets - Goodwill 187.0 159.3 - Intangible 31.8 7.7 - Tangible 30.7 18.7 Interests and Joint Ventures 1.2 0.9 Net Other Assets 3.9 1.5 Deferred Consideration (17.9) (5.3) Deferred Income (14.6) (15.1) Net (Debt)/Funds (16.3) 11.2 Deferred Tax (3.5) 0.6 Pension Obligations (1.2) (2.6) Net Assets 201.1 176.9 24
Appendix II Cash Flow Year ended 31 March 2006 £’million 2006 2005 Profit from operations* 54.4 42.2 Depreciation/Software amortisation, share schemes, pension schemes 5.7 6.1 Share of joint ventures (0.3) - Increase in working capital (4.2) (5.4) Cash generated by continuing operations 55.6 42.9 Net interest (0.8) 0.2 Taxation (13.8) (10.3) Capital Expenditure (15.7) (7.8) Acquisitions (34.7) (20.2) Disposals (1.3) 19.0 Equity Dividends (10.7) (9.3) Purchase of own shares (8.2) (8.4) Financing 3.5 6.2 Cash from continuing operations (26.1) 12.3 Discontinued cash flow 1.4 (3.0) (Decrease)/Increase in Cash (24.7) 9.3 25 Net (Debt)/Cash (16.3) 11.2 *Pre amortisation of acquisition intangibles and exceptional costs
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