Preliminary results 22 May 2018
Highlights Record profjt growth – adjusted operating profjt up 29% to £153.4m • Customer numbers up 7% to 8.4m; retention strong at 82% • Further step change in North America – excellent organic and acquired growth • £125m equity placing with DPS acquisition announcement in October 2017 • • Good strategic progress in the UK Double digit profjt growth in France and Spain • Four global business lines to position us for future growth – Membership, Home Experts, • HVAC and Smart Home 25% increase in dividend to 19.1p. • homeserveplc.com 1
Group financial summary £million FY17 Δ% Δ% CC 1 FY18 Total revenue 785.0 15% 15% 899.7 Adjusted operating profjt 118.8 29% 30% 153.4 Adjusted profjt before tax 112.4 26% 27% 141.7 EBITDA 154.2 28% 29% 197.6 Net debt 261.4 (9)% 237.8 Net debt: EBITDA 1.7x — 1.2x Adjusted earnings per share 27.0p 24% 33.6p Ordinary dividend per share 15.3p 25% 19.1p • Strong second half to deliver a record-breaking full year Increasing proportion of profjts earned overseas. • 1 Constant currency $1.31 : £1, €1.19 : £1 homeserveplc.com 2
Divisional financial performance Revenue Adjusted operating profjt/(loss) ∆% ∆% CC 1 ∆% ∆% CC 1 £million FY17 FY17 FY18 FY18 UK 326.5 12% 12% 63.2 (3)% (3)% 365.6 61.1 North America 227.8 24% 28% 21.2 129% 146% 282.1 48.6 France 91.1 10% 5% 27.1 16% 13% 100.0 31.5 Spain 130.2 9% 4% 13.3 26% 20% 141.3 16.6 New Markets 16.6 12% 9% (6.0) (29)% (29)% 18.6 (4.4) Inter-segment (7.2) 10% 10% — — — (7.9) — Group 785.0 15% 15% 118.8 29% 30% 899.7 153.4 1 Constant currency $1.31 : £1, €1.19 : £1 homeserveplc.com 3
Cash flow performance and capital structure Cash generated by operations £164.2m £197.6m £123.3m £10.5m £2.9m £0.2m £27.2m £107.8m £50.4m £71.1m £261.4m £253.3m £237.8m £42.4m £9.0m Net debt Adjusted Non- Working Capital Ordinary Tax Net Foreign Other Underlying Equity M&A 2 Net debt 31 March EBITDA cash capital expenditure dividend interest exchange net debt placing 1 31 March 2017 items 2018 Cash conversion of 107% • • Funding headroom of £270m+ 1 Gross proceeds of £125m, net of issue costs Revised net debt: EBITDA range of 1.0x to 2.0x. • 2 £53.6m DPS policy book acquisition shown within M&A. Statutory presentation is within Capex. homeserveplc.com 4
Capital expenditure • £71m ordinary capex, in line with our £70m guidance – £16m partner payments – £55m investment principally to improve the customer journey and 55 40 45 drive network effjciency Continued investment, growth and technology related • 20 16 14 – Modest reduction in capex in FY19 FY16 FY17 FY18 FY19 ● Partner payments ● Underlying / Technology – Normalise at c. £35m from FY20. homeserveplc.com 5
UK – most developed membership business, progress with growth initiatives Customers (m) and retention rate 82% 80% 79% Customers at 2.2m with complementary M&A • 10% increase in net income per customer refm ects richer • product line 2.2 2.2 2.2 Key decisions impact profj t in FY18 but make us leaner and • more effj cient in FY19 FY16 FY17 FY18 New partner opportunities in energy – E.ON and Octopus • Energy. Adjusted operating profj t (£m) 63.2 e v i e w s , f r o l r m e a c u 61.1 r s 4 t 6 o 8 m e n 95 r 58.0 o % s d l i k e e s a y B o of customers would u . buy again. 8.2 by FY16 FY17 FY18 homeserveplc.com 6
UK – tangible progress on LeakBot • Transition from proof of concept to a genuine commercial proposition – Revenue model defj ned – WiFi version developed – Nine live test partnerships – Two sizeable orders; IoT Denmark & Neos. homeserveplc.com 7
France – strong utility partnerships with potential to expand Customers (m) and retention rate 89% 89% 88% Adjusted operating profj t up 13% to €35.7m • Customers up 1% to 1.1m • 1.1 Strong partnerships with Suez and Veolia with scope for further • 1.0 1.0 development • Expanded relationship with Butagaz FY16 FY17 FY18 Strategic move into HVAC. • Adjusted operating profj t (€m) 35.7 31.5 31.4 FY16 FY17 FY18 homeserveplc.com 8
Spain – good profi t growth Customers (m) and retention rate 78% 78% 77% • Adjusted operating pro fi t up 20% to €18.9m • Customers up 1% to 1.3m 1.3 1.3 • Endesa relationship draws to a close in the coming weeks 1.2 • New partner and product options including Tech Angel with telecoms partners. FY16 FY17 FY18 Adjusted operating profi t (€m) 18.9 15.8 13.9 FY16 FY17 FY18 homeserveplc.com 9
North America – a record year Customers (m) and retention rate 83% 82% 82% 20% customer growth to 3.6m • – 11% organic growth 3.8 – Successful policy book acquisition of Dominion Products & Services 3.6 3.0 2.3 Business development continues apace • – 103 new utility partners added in FY18 FY16 FY17 Pro forma 1 FY18 1 Pro forma includes DPS Scaling for growth • Adjusted operating profj t ($m) – 146% increase in adjusted operating profj t to $64.4m – Profj t margin up 8 ppts to 17%. 64.4 26.2 17.5 FY16 FY17 FY18 homeserveplc.com 10
North America – prospects for growth remain very strong Further opportunities for policy book acquisitions • – 14 acquisitions in 10 years – 28 potential policy book opportunities remain Proven acquisition and integration processes • • New contact centre opened in April 2018 increases operational capacity. Future M&A opportunities Total Policies (m) Size Number Large > 250,000 policies 7 5.7 Medium > 50,000 policies 7 0.8 Small < 50,000 policies 14 0.3 28 6.8 homeserveplc.com 11
North America – rapid progress Pro forma 2 Future 2016 1 Households (m) 32 58 80 Customers (m) 2.3 3.8 8.0 Net income per customer ($) 91 91 100 Adjusted operating margin % 8% 17% 20% Adjusted operating profjt ($m) 17.5 64.4 160 ¹ HomeServe capital markets day (June 2016) ² Pro forma includes DPS Tranche 2, expected to complete autumn 2018 homeserveplc.com 12
Four global business lines and international opportunities ...new countries Membership Smart Home Subscription-based home assistance for Development and distribution of technology to homeowners covering plumbing, heating, enable home automation, including LeakBot, electrical, locks, glazing, pest control and smart thermostats and connected boilers. technology. Home Experts Heating, Ventilation and Air On demand, online marketplace to find vetted Conditioning (HVAC) and reviewed local tradespeople for a broad A complete solution to the installation, range of home repairs and improvements. repair, maintenance and financing of heating, ventilation and air conditioning. homeserveplc.com 13
HVAC – a buy and build model • An opportunity for all four territories • Replicating our installations success in North America • Acquisition of Help-Link in the UK and Electrogaz in France • Developing an innovative consumer proposition • Self-fj x off ers synergies for our Membership businesses. homeserveplc.com 14
Home Experts – our biggest opportunity Market size & opportunity Preferred model Home repairs and improvements £400bn 62% Membership £14bn 24% 14% In our existing markets... ● Membership; UK ONS survey + HomeServe estimate ● Checkatrade ● Lead sales model ● No preference ● Home repairs + improvement; HomeServe estimate And... ● Habitissimo’s other territories Source: Independent online survey conducted April 2018. homeserveplc.com 15
Checkatrade – very good progress Consumer growth More benefi ts for tradesmen Tradesmen Pricing recruitment model • Monthly charging • Based on work volumes 23k 29k • from £69.99/month Buying Tradesmen club software • Procurement • Developed benefj ts by Habitissimo homeserveplc.com 16
Summary and outlook • A record year • Signifjcant progress and opportunity in North America • Step change in innovation Our vision is to be the – A new online marketplace in Home Experts world’s most trusted – A new way of operating in HVAC provider of home repairs – A start-up technology success with LeakBot and improvements. – Reinventing customer service for a digital world in Membership • Just the beginning... Membership HVAC Smart Home Home Experts homeserveplc.com 17 17
Appendix • Divisional KPIs • Divisional results – local currency • Divisional results – sterling • Group balance sheet • Group cash fmow • Foreign exchange impact • Our home assistance fjnancial business model homeserveplc.com 18
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