Preliminary Results 19 May 2015
Group returns to profit growth plus strong customer growth Adjusted profit before tax 1 (£m) 126.0 • Profjt growth combined with signifjcant extra investment in USA 105.0 28.5 85.4 34.1 84.1 • Group delivers strong customer growth, up 0.8m to 6.3m 37.3 39.2 • Customer growth of 26% in the USA 103.1 78.3 53.4 56.4 • UK business with 2.1m customers and profjts of £56.4m 2012 2013 2014 2015 • USA added 2.5m utility households and 22m AARP households UK Established International New Markets Net Interest • Momentum in France with announcement of new partner Customer numbers (m) 6.3 • Strong customer and profjt growth in Spain 5.5 4.9 4.9 • Special dividend of 30p per share (£97m) to be paid in July 2015 4.2 2.2 3.4 2.6 2.7 2.3 2.1 2.1 2012 2013 2014 2015 1 All references to adjusted profjt or loss, adjusted profjt before tax, adjusted EBITDA and adjusted earnings per share throughout the presentation are adjusted fjgures excluding UK customers International customers acquisition intangibles and exceptional items.
Group financial summary £million 2015 2014 Revenue 584.2 568.3 Adjusted EBITDA 106.9 109.4 Adjusted profjt before tax 85.4 84.1 Net Debt 64.1 42.3 Debt: Adjusted EBITDA 0.6x 0.4x Adjusted earnings per share 18.6p 19.0p Ordinary dividend per share 11.5p 11.3p Special dividend per share 30.0p n/a • Revenue growth principally in the USA and Spain • Group profjt growth, in part offset by additional investment in the USA and the impact of a weak Euro • Adjusted operating profjt £1.5m higher at constant currency
Divisional financial performance Revenue Adjusted operating profit/(loss) ∆ % ∆ % £million 2015 2014 2015 2014 UK 285.5 288.5 -1% 56.4 53.4 6% USA 125.3 110.9 13% 6.4 12.9 -51% France 74.9 77.3 -3% 23.4 22.3 5% Spain 90.9 82.6 10% 7.5 4.0 87% Established International 291.1 270.8 8% 37.3 39.2 -5% New Markets 13.8 14.4 -4% (5.9) (5.7) 4% Inter-division (6.2) (5.4) — — — — Group 584.2 568.3 3% 87.8 86.9 1% • UK profjts up £3m to £56.4m • Additional marketing and business development investment (£12m) in the USA reducing profjt • Continued good performance in France, despite weakening Euro in the last quarter • Strong profjt growth in Spain refmecting an increase in customer numbers • Continued investment in New Markets
Cash flow performance Cash generated by operations £94.6m £22.8m £0.9m £64.1m £42.3m £109.4m £36.9m £57.6m £13.2m £6.0m £4.4m Net Debt Adjusted Non-cash Exceptional Working Capital Dividends Tax Other Net Debt 31 March EBITDA items items Capital Expenditure & 31 March 2014 investment 2015 • Net debt at £64.1m, 0.6x Debt: Adjusted EBITDA (2014 0.4x) – Working capital investment across the businesses – Capital expenditure and investments • New £300m 5 year RCF in place at competitive rates
Capital expenditure and investments • 2015 capital expenditure Capital investment (£m) – Core customer IT system £70m – Partner payments in Spain £58m 20 – Underlying including technology 18 – Investment in connected homes £35m 10 £25m • Higher expected 2016 capital expenditure 40 50 10 – Core customer IT system 25 15 – Partner payments in Spain and France 2015 2016 2017 2018 – Technology investment Underlying/Technology Partner Payments • Customer acquisition programme in Spain not agreed beyond 2016 • Capex to normalise in 2018 at around £25m
A more efficient capital structure £97m return of capital • Year end leverage range 1 - 1.5x Debt: EBITDA (currently 0.6x) • Special dividend of 30p per share - £97m • Share consolidation Progressive dividend policy • Increase ordinary dividend to 11.5p per share (2014: 11.3p) • Adopt a progressive dividend policy • Target a medium term dividend cover in the range 1.75x - 2x
Financial outlook – good growth in 2016 UK • Stable customers and retention International • Reduced profjts in France due to – Increased customer acquisition – Continued weaker Euro • Strong growth in the USA and Spain • Continued investment of around £6m in New Markets Group • Continued strong cash generation • Investment in technology and innovation
UK – delivering our plans with great products and service • New customers acquired increased from 0.2m to 0.3m • Retention rate increased to 83% up from 82% • Enhanced products delivering increased customer use • Customers stable at 2.1m Gross new customers (m) Retention % 83% w s i e , f r v o 82% e m r l c a e u s r t 4 o 9 m 2 e , 93 2 r % s 0.3 n l o i k d e e y s o a of customers would u B . 0.2 80% buy again. 0.1 79% by 2013 2014 2015 2012 2013 2014 2015
UK – investment in operations and service • New vehicles, equipment and connectivity for engineers • New customer-facing front end system • Data warehouse and analysis tools • Digital self-service enhancement continues
UK – connected home • In partnership with Nest and tadoº • Nearly 20,000 smart thermostats installed • Enabling proactive home assistance
USA – marketing investment delivers 26% customer growth • New customers acquired increased from 0.5m to 0.7m • Good retention performance at 82% up from 81% • Customer numbers closed at 2m Gross new customers (m) Retention % Total customers (m) 82% 81% 80% 79% 0.4 0.5 0.5 0.7 1.1 1.3 1.6 2.0 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015
USA – 12 new utility partners and strong pipeline 2012 2013 2014 2015 +1.3m households +0.8m households +4.4m households +2.5m households 21m 22m 26m 29m Households T ownship of O cean THE LANDIS SEWERAGE AUTHORITY S ewerage A uthority (including an extension with an existing partner)
USA – Test marketing with AARP • AARP helps people over 50 to improve the quality of their lives – 22m households – closely aligned to our customer demographic • First mailing was delivered in January 2015 – returns higher than from our own brand activity – normal on going testing • Full marketing roll out during 2016
USA – Energy and water effi ciency, an enabler to new partner signings • Energy effj ciency annual spend of $6bn • Top priority for energy company CEO’s • Strategic partnership with leading effj ciency specialist • Enables access to decision makers • Accelerate new partner signings
France – fresh momentum with new partner Profi t (£m) Good performance in 2015 • Profj t up 5% to £23.4m 22.3 23.4 16.7 21.5 • Customers closed at 0.9m, up 3% • Continued strong retention at 89% 2012 2013 2014 2015 Signed new affi nity partnership • Long-term agreement with Lyonnaise des Eaux • Second largest water utility provider in France with 5.3m households • Multi channel marketing approach • Expect a net investment cost of £2m in 2016
Spain – strong customer and profit growth • Profjt up 87% to £7.5m • Customer numbers up 37% to 1.1m • Good customer acquisition with 0.5m gross new customers • Retention rate up to 79% • Further activity with Endesa planned for 2016 Customers (m) Retention % Profit (£m) 79% 75% 1.1 7.5 0.8 4.0 0.4 0.3 3.1 2.8 2012 2013 2014 2015 2013 2014 2015 2012 2013 2014 2015
New Markets update Italy making good progress • Closed the year with 0.2m customers • Active business development Plan to exit Germany • Tested using door step selling in 2015 • Call transfer model not launched Plan to increase investment in innovation and digital
Growth over the next 5 years Richard Harpin
Our mission and strategies to win Our Mission To provide home assistance membership which frees our customers from the worry and inconvenience of emergencies, repairs and installations. Our strategies to win 1. Driving innovation: Creating a heating installation capability via franchising 2. Digital Hub and Spoke Model delivering online job booking and tracking and reducing our cost to serve 3. Accelerating growth in the USA by delivering energy efficiency and water conservation for our utility affinity partners and their customers
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