Preliminary Results 24 May 2016
Good customer and profit growth with step change in US expansion • Group profjt up 9% to £93.0m Adjusted profit before tax 1 (£m) 93.0 • Good customer growth across all territories, up 11% to 7m 85.4 84.1 • Continued good retention at 83% 45.2 37.3 39.2 • Agreement to acquire Utility Service Partners Inc. (USP) for $75m adding 0.4m customers and 9.4m partner households 58.0 56.4 53.4 • Continued investment in New Markets – positive signs on international development FY14 FY15 FY16 UK Established International • Adjusted earnings per share up 15% to 21.8p New Markets Net Interest • Dividend up 10% to 12.7p Customer numbers (m) 7.0 6.3 5.5 4.8 4.2 3.4 2.2 2.1 2.1 FY14 FY15 FY16 UK customers International customers 1 All references to adjusted EBITDA, adjusted operating profjt or loss, adjusted profjt before tax and adjusted earnings per share throughout the announcement exclude the amortisation of acquisition intangibles and exceptional items. homeserveplc.com 1
Group financial summary £million FY16 FY15 ∆ % Total revenue 633.2 584.2 +8% Adjusted EBITDA 122.7 109.4 +12% Adjusted profit before tax 93.0 85.4 +9% Adjusted earnings per share 21.8p 19.0p +15% Ordinary dividend per share 12.7p 11.5p +10% Net debt £169.5m £64.1m Debt : Adjusted EBITDA 0.6x 1.4x • Revenue up £49m to £633.2m with good growth in the USA and Spain • Good profjt progression, particularly in the USA • Adjusted operating profjt £2.2m higher at constant currency • Debt: Adjusted EBITDA at 1.4x refmecting special dividend payment in July 2015 homeserveplc.com 2
Divisional financial performance Revenue Adjusted operating profit £million FY16 FY15 FY16 FY15 ∆ % ∆ % UK 285.5 56.4 291.8 58.0 +2% +3% USA 152.6 125.3 12.1 6.4 +22% +89% France 77.4 74.9 23.2 23.4 +3% -1% Spain 90.9 7.5 97.5 9.9 +7% +33% Established International 327.5 291.1 45.2 37.3 +13% +22% New Markets 13.8 (5.9) 20.1 (5.9) +46% – Inter-segment (6.2) (6.2) – – – – Group 633.2 584.2 97.3 87.8 +8% +11% • UK profjts up 3% to £58.0m • Increase in profjt in the USA refmecting 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 • Profjt progression in Spain refmects an increase in renewals • Continued investment in New Markets homeserveplc.com 3
Cash flow performance – strong cash generation Total dividend £137m £3.8m £169.5m £5.3m £17.3m £37.6m £99.4m Cash generated by operations £121.7m £64.1m £122.7m £63.7m £6.1m £5.1m Net Debt Adjusted Non-cash Working Capital Special Ordinary Tax Acquisitions Interest/ Net Debt 31 March 2015 EBITDA items capital expenditure dividend dividend other 31 March 2016 • 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 refmecting continued growth in the business • Strong cash conversion at 125% of adjusted operating profjt • Acquisition of a gas services business in the UK • Closing net debt at £169.5m, 1.4x Debt: EBITDA homeserveplc.com 4
Capital investment – driving customer service and efficiency • FY16 capital expenditure Capital investment (£m) – Core customer IT system £64m Plan £58m – Partner payments in Spain and France £55m 20 18 – Underlying technology 20 £30m £25m • Benefjts from our new customer system 10 44 40 10 35 – Single view of the customer 20 15 – Improve marketing effectiveness FY15 FY16 FY17 FY18 FY19 – Reduce cost to serve Underlying/Technology Partner payments • 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) homeserveplc.com 5
France – accelerating our customer growth • Renewed sales momentum following Lyonnaise des Eaux partnership • Strong customer growth up 7% to 1.0m • Strong retention at 89% • Profjt up 7% to € 31.4m • Investment in business development with good pipeline of partner prospects Profit ( € m) Customers (m) 31.4 1.0 29.5 0.9 0.9 26.6 France FY14 FY15 FY16 FY14 FY15 FY16 homeserveplc.com 6
Spain – strong profit growth • Strong profjt growth, up 46% to € 13.9m • Customer numbers up 11% to 1.2m • Retention rate at 77% refmecting volume of fjrst year renewals • Strong relationship with Endesa – FY17 marketing activity agreed • Investment in business development with good pipeline of partner prospects Profit ( € m) Customers (m) 1.2 13.9 1.1 0.8 9.5 4.8 FY14 FY15 FY16 FY14 FY15 FY16 homeserveplc.com 7
UK – Customer and profit growth • Solid business with 2.2m customers, up 100k on FY15 • Marketing investment delivers 0.4m gross new customers • Retention performance at 82%, refmecting number of fjrst year renewals • Income per customer up to £94 driven by an increase in Year 2+ income • Strong affjnity partnerships, six renewed in the year • Continued investment in our people, delivering great customer service Gross new customers (m) Profit (£m) e w s , v i f r e o r m l a c e u r s 3 t o 8 m 9 , e 93 1 r % s n l o i k 0.4 58.0 d e e 56.4 y s o a B of customers would u . 0.3 53.4 buy again. 0.2 0.1 by FY13 FY14 FY15 FY16 FY14 FY15 FY16 homeserveplc.com 8
UK – acquisition enhances gas delivery capability 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 homeserveplc.com 9
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 • Global patent-pending homeserveplc.com 10
USA – step change in growth and gaining momentum • Agreement to acquire Utility Service Partners for $75m • Customer numbers up 17% to 2.3m • Affjnity partner households at 42m with USP • Continued solid 82% retention • Delivered signifjcant increase in profjts to £12.1m • Established relationship with AARP Total customers (m) Affinity partner households (m) 2.7* 42* 2.3 2.0 32 29 1.6 26 FY14 FY15 FY16 FY14 FY15 FY16 * Proforma post acquisition of USP homeserveplc.com 11
USA – Agreement to acquire Utility Service Partners (USP) • A home assistance business with 0.4m customers • Over 300 affjnity partners covering 9.4m households in the USA • Exclusive arrangement with National League of Cities • Anticipate completion in fjrst half of FY17 • Investment in marketing and integration in FY17 • Incremental $15m EBITDA in FY18 CANADA USA USP HomeServe USA Utility Service Partners USP USP homeserveplc.com 12
USA – 11 new utility partners and strong pipeline FY13 FY14 FY15 FY16 USP +0.8m households +4.4m households +2.5m households +2.8m households +9.4m households 42m Households 22m 26m 29m 32m • 2.8m households added in the year • Excellent new partner pipeline homeserveplc.com 13
New Markets – developing and extending into new territories Italy • 0.3m customer and into profjt • 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 homeserveplc.com 14
Digital – consistent end to end customer experience • Appointed Chief Digital Offjcer • Established Digital Hub • Enabling self-serve and delivering effjciencies • Developed Trace – engineer job scheduling technology • Seed funding in digital start-up homeserveplc.com 15
Summary – a year of strong customer and profit growth FY16 • Strong growth in France, Spain and the USA • Step change in US expansion Outlook • Expect continued good growth in FY17 • USP to add $15m in FY18, the fjrst full year of ownership • Potential for further bolt-on acquisitions in the UK and USA • Continued investment in business development, international expansion and innovation Capital Markets Day – 29 June 2016 homeserveplc.com 16
Appendices • Divisional KPIs • Divisional results local currency • Group balance sheet • Group cash fmow • Target market in the USA • Our fjnancial business model homeserveplc.com 17
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