1 Another excellent set of results Profit before tax* (m) 100.6 - - PowerPoint PPT Presentation

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Another excellent set of results

• Double-digit growth in earnings:
• Revenue† up 21% to £369.0m
• Profit before tax* up 13% to £100.6m
• Contribution from International operations up 72% to £8.7m
• Dividend per share up 24% to 44.0p
• Strong operational performance:
• Global customer and policy growth of 8% and 12% respectively
• Strong retention performance across all businesses
• 10 new affinity partners signed, including:
• Agbar in Spain
• National Grid USA
• Southern California Gas

5.7 7.1 8.1 9.2 10.3 2006 2007 2008 2009 2010 Policies (m) 40.5 51.6 70.6 88.7 100.6 2006 2007 2008 2009 2010 Profit before tax* (£m)

*Continuing operations - excluding amortisation of acquisition intangibles, joint venture taxation and exceptional operating items †Including commissions but excluding exceptional operating income received during the period

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Global Policy Retention Rate 2009 2010

2009 2010

Policies Customers

How operational performance drives value

Strong Affinity Partnerships Product Design Sales and Marketing Capability Claims and Network Management Customer Loyalty Value Drivers

Affinity households Customer and policy growth Recurring Income

4.3m 9.2m 4.7m 10.3m 83.7%

Strong retention performance >83%

+ 8%

83.6%

Marketable Households 2009 2010

56m 68m*

+ 12% +23%

*Includes 5m households from National Grid and 5.3m households from Southern California Gas

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• Revenues† up 21% (15% excluding acquisitions and currency movements) with a 13% increase in profit before tax*
• Strong performance across all membership divisions including 10% growth in UK operating profit*
• Dividend and earnings per share^ growth of 24% and 14% respectively
• Slight reduction in operating* margin as a result of the planned increase in customer acquisition marketing in the UK

and continued investment in business development across all membership businesses

• Exit from UK Emergency Services complete resulting in loss from discontinued operations of £42m

† Including commissions but excluding exceptional operating income * Excluding amortisation of acquisition intangibles, joint venture taxation and exceptional operating items ^ Excluding amortisation of acquisition intangibles and exceptional operating items

Group financial highlights

£million FY 2010 FY 2009 Change Revenue† 369.0 304.3 21% Operating Profit* 104.4 92.3 13% Operating profit* margin 28.3% 30.3%

• 2.0%ppts

Profit before Tax* 100.6 88.7 13% Earnings per share^ 110.9p 96.9p 14% Dividend per share 44.0p 35.5p 24%

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UK Membership

• Revenue† growth of 16% driven by:
• Increase in renewals income reflecting good retention performance
• Continuing good levels of new policy sales including combined policies
• Increase in network revenues (+£8.0m) reflecting higher proportion of jobs carried out by our own plumbers
• Retention rate of 82.5% (2009: 83.0%)
• Acquisition of Reactfast to accelerate One Contact rollout and a number of plumbing and drainage contractors

† Including commissions but excluding exceptional operating income * Excluding amortisation of acquisition intangibles, joint venture taxation and exceptional operating items

• Continued strong growth in our UK business
• Contribution from our International operations grew by 72% to £8.7m

Membership financial performance

£million Revenue†  Operating  Revenue† Operating Profit* Profit* FY10 FY09  UK Membership 286.7 16% 95.8 10% 246.6 87.2 33.4% 35.4%

• 2.0ppts

International Membership 112.2 38% 8.7 72% 81.3 5.1 7.7% 6.2% 1.5ppts Less JV/Inter-division revenues (29.8)

• (23.7)
• Total Membership

369.0 21% 104.4 13% 304.3 92.3 28.3% 30.3%

• 2.0ppts

FY 2010 FY 2009 Margin %

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Continental Europe

• Revenues grew by 29% in Doméo (24% in local currency) and operating profits* by 17% as a result of high retention and

policy sales

• SFG contributed revenue of £7m and operating profit* of £0.7m with investment in developing our European manufacturer

warranty business

• Spain delivered revenue growth of 19% (14% in local currency) and a contribution of £0.4m, with profits from the claims

handling operation reinvested in our policy business

• In Belgium, SPT continues to perform well, generating £2.8m of revenue and £0.4m of operating profit* with investment in

infrastructure and systems required to build a policy business in the region

Continental Europe

† Including commissions but excluding exceptional operating income * Excluding amortisation of acquisition intangibles, joint venture taxation and exceptional operating items

£million Revenue†  Operating  Revenue† Operating Profit* Profit* FY10 FY09  France

• Doméo

29.8 29% 5.7 17% 23.2 4.8 19.0% 20.9%

• 1.9ppts
• SFG

7.0

• 0.7
• 0.0

0.0 10.4%

• Spain

46.9 19% 0.4 +£0.3m 39.3 0.1 0.8% 0.3% 0.5ppts Belgium 2.8 +£1.9m 0.4 2% 0.9 0.4 15.1%

• Continental Europe

86.5 36% 7.2 35% 63.4 5.3 8.3% 8.4%

• 0.1ppts

USA 25.7 43% 1.5 +£1.8m 17.9 (0.3) 5.8%

• 1.6%

7.4ppts International before JV elimination 112.2 38% 8.7 72% 81.3 5.1 7.7% 6.2% 1.5ppts JV revenues (29.8)

• (23.2)
• International Membership

82.3 42% 8.7 72% 58.2 5.1 10.6% 8.7% 1.9ppts FY 2010 FY 2009 Margin %

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USA

• US business delivered revenue growth of 43% (41% in local currency) and a maiden operating profit* of £1.5m driven by

a 31% increase in customer numbers and high levels of retention

• Significant increase in our household footprint with affinity partner households increasing to over 20m on the back of long

term agreements with National Grid USA and Southern California Gas

• Acquisition of National Grid Energy Services contract business for net consideration of $14m
• Step change in household numbers and continued momentum makes US business well placed to deliver profit growth in

the future

USA

† Including commissions but excluding exceptional operating income * Excluding amortisation of acquisition intangibles, joint venture taxation and exceptional operating items

£million Revenue†  Operating  Revenue† Operating Profit* Profit* FY10 FY09  Continental Europe 86.5 36% 7.2 35% 63.4 5.3 8.3% 8.4%

• 0.1ppts

USA 25.7 43% 1.5 +£1.8m 17.9 (0.3) 5.8%

• 1.6%

7.4ppts International before JV elimination 112.2 38% 8.7 72% 81.3 5.1 7.7% 6.2% 1.5ppts JV revenues (29.8)

• (23.2)
• International Membership

82.3 42% 8.7 72% 58.2 5.1 10.6% 8.7% 1.9ppts FY 2010 FY 2009 Margin %

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• Strong performance with cash conversion of 93% and closing net debt of £52.9m with significant headroom on borrowing facilities
• Increase in working capital of £20.8m reflects growth in our membership businesses, with a greater proportion of customers moving to

combined policies and paying by monthly direct debit

• Increase in capital expenditure as we continue to invest in IT systems and information databases
• Acquisition expenditure includes SFG, Reactfast and a number of plumbing and drainage businesses in the UK

Cash flow

(£million) FY10 FY09 Operating profit* from continuing operations 104.4 92.3 Exceptional items, tax on joint venture and amortisation of acquisition intangibles 1.7 (7.9) Operating loss from discontinued operations (excl impairment) (27.6) (4.7) Operating profit from continuing and discontinued operations 78.6 79.7 Depreciation, amortisation and other non-cash items 15.7 23.3 Increase in working capital (20.8) (10.8) Cash generated by operations cash conversion % 73.4 93.4% 92.2 115.7% Net interest (3.4) (4.4) Taxation (21.5) (21.0) Capital expenditure (25.5) (16.9) Acquisitions/disposals (25.8) (23.4) Equity dividends paid (23.2) (20.4) Dividend from joint venture 3.3 Issue of shares 4.1 3.0 Net movement in cash and bank borrowings (18.6) 9.1 Impact of foreign exchange (0.3) Net debt (52.9) (34.0)

Non cash items includes depreciation, amortisation of other intangibles, share based payments and share of results of joint venture (before tax) and loss/(gain) on disposal of assets * Excluding amortisation of acquisition intangibles, joint venture taxation and exceptional operating items

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Affinity Households Core Renewable Customers (CRCs) Income per CRC

KPIs Value drivers

Customer penetration % Policies per customer

Which Key Performance Indicators drive our business?

Strong Affinity Partnerships Product Design Sales and Marketing Capability Claims and Network Management Customer Loyalty

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• Core Renewable Customers (“CRCs”) are those customers that we have recruited under an affinity partner brand or
• ur own brand and where we have a direct ongoing relationship with the customer including the right to renew
• Revenue Customers are those customers where we receive income for providing a policy or service but where we do

not have a direct ongoing customer relationship or renewal rights

• Change in approach only impacts the UK as all of our international businesses already report KPIs on this basis

UK additional KPI information

UK Membership 2010 2009 Change % 2010 2009 Change % Affinity partner households (m) 23.4 23.4

• 23.4

23.4

• Core Renewable Customers ('000)

2,876 2,807 2.4% 2,876 2,807 2.4% Revenue Customers ('000)

• 379

352 7.7% Total Customers ('000) 2,876 2,807 2.4% 3,255 3,159 3.0% Affinity partner penetration (%) 12.3% 12.0% 0.3ppts 13.9% 13.5% 0.4ppts Income per customer (£) 82.20 71.74 14.6% 73.63 64.77 13.7% Total policies ('000) 7,097 6,645 6.8% 7,552 7,054 7.1% Retention rate (%) 83.0% 83.2%

• 0.2ppts

82.5% 83.0%

• 0.5ppts

Policies per customer (x) 2.47 2.37 4.2% 2.32 2.23 3.9% Gross new policies ('000) 1,581 1,619

• 2.4%

1,834 1,826 0.5% Old basis including Revenue Core Renewable Basis

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• Strong organic growth on the back of continued customer and policy growth

Organic growth Resilient business model Increased footprint Cash conversion

• Business model robustly tested with good retention performance across our

membership businesses and high levels of recurring revenues

• Significant increase in affinity partner households providing foundation for future

growth

• Continued strong cash conversion and low levels of net debt providing good levels of

financial flexibility

Financial summary

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Grow the customer base in the UK Grow penetration in Europe Double footprint of marketable households in the USA Develop manufacturer warranties business in Europe Enter new markets

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Driving the membership and marketing investment model

• 3% growth in 2010
• We now have 20m+ US marketable households
• European customers up 16%
• UK Oil and US gas market
• Acquisition of SFG and application of UK model
• Dyson partnership
• Optimising the return per unit of marketing investment

Promise at September 09 Analyst Day Progress

     

5 4 2 3 1

Delivering against our promises

14 Policies (m) 2010 2009 Change Plumbing and Drains, Water Supply Pipe 4.18 4.10 Electrics 0.78 0.77 Gas and Gas Supply Pipe 0.84 0.85 Manufacturer Warranties 0.39 0.33 Other 1.37 1.01 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% 2007 2008 2009 2010 New Policies Sold (m) Policies (m) Policies Per Customer

1.92 2.08 2.23 2.32 6.0 1.7 6.6 1.7 1.8 7.6 1.8 7.1

A resilient and growing UK business

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Market Opportunity

UK annual repairs Electrical break down 6.6m Central heating breakdown 4.5m Break in/Lock, boarding up 2.7m Plumbing & Drainage/Water supply pipe 2.4m Electrical wiring 0.9m Pest 0.5m 17.6m

Reasons for not purchasing cover:

• It won’t happen to me
• Cost/risk doesn’t stack up
• Covered by household insurance
• New home
• Haven’t got round to it

Rented Properties Owner Occupied Properties 7.5m 10.1m UK Households with NO home emergency cover

Company estimates and research

Channel Product

One Contact

Oil Landlords Credit card IFA’s Travel Energy Water Flats New Existing Existing New

Customer Insights Growth Initiatives But it will happen to you:

Significant growth potential in the UK

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• Now available on a national basis
• ReactFast acquisition now fully integrated
• Increasing conversion rate from pay on use

customers to members One Contact Landlords

• New product launched for rental market
• Direct advertising in the national press
• Partner discussions underway to maximise

distribution and take up rates

Good progress on customer growth initiatives

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• Increased investment in core utility marketing
• New product designed to cover Private Drains
• New partnership signed with nPower

Oil

• Over 1m households use oil for their heating in the UK
• Long term partnership signed with GB Oils
• Current penetration of boiler breakdown cover is only 5%

Water Utilities and Energy

Good progress on customer growth initiatives

18 Policies (‘000) 2010 2009 Change Plumbing and Drains, Water Supply Pipe 1,060 876 Electrics 228 174 Other including Water Loss 640 517 Total Policies 1,928 1,567 +23% Customers (‘000) 769 683 +13% Retention rate (%) 88.3 87.9 +0.4ppts Income per customer (€) 88 80 +10%

France – Doméo continued momentum

2007 2008 2009 2010 New Policies Sold (000) Policies (000) Policies Per Customer

1,928 863 1,180 526 1,567 2.51 532 2.29 1.99 2.14 492 441

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• Replicating our UK manufacturer warranty business model in Europe

through SFG

• Acquired SFG in May 2009
• Largest provider of warranties for domestic appliances in France
• Investment in personnel and systems during the year
• Continued growth in UK warranty business
• New partnership signed with Dyson
• 24 UK partner brands with discussions ongoing with European

manufacturers

Building our European Manufacturer Warranty business

Maximise Registration Identify and market additional customers Post Breakdown Sales Retain and cross-sell

• Simple card
• Sticker on appliance
• Free guarantee
• External databases
• Manufacturer data
• Target non-

insurance minded customers

• Instant cover
• Increase value

per customer

• Cross sell core

policies Maximise Registration Identify and market additional customers Post Breakdown Sales Retain and cross-sell

• Simple card
• Sticker on appliance
• Free guarantee
• External databases
• Manufacturer data
• Target non-

insurance minded customers

• Instant cover
• Increase value

per customer

• Cross sell core

policies

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2009 2010 Policies ('000) Policies per Customer

94 48 1.01 Policies (‘000) 2010 2009 Change Plumbing and Drains 10 1 Electrical 57 19 Other 28 27 Total Policies 94 48 +98% Customers (‘000) 79 47 +67% 1.19

• Near doubling of our policy book in Spain on the

back of marketing to Endesa customers

• Long-term affinity partner agreement signed with

Agbar, Spain’s largest water company with over 4 million domestic customers

• Agbar relationship increases our affinity

partnership households to 10 million

The addition of a major water partner in Spain

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2007 2008 2009 2010 New Policies Sold ('000) Policies ('000) Policies Per Customer

263 362 549 246 1.24 290 756

Policies (‘000) March 2010 March 2009 Change Plumbing and Drains, Water Supply Pipe 518 419 Electrics 82 60 Other 156 70 Total Policies 756 549 +38% Affinity households (m) 20.3* 9.4 +10.9m Customers (‘000) 580 442 +31% Retention rate (%) 82.6 80.0 +2.6ppts Income per customer ($) 70 65 +8%

1.30 1.22 1.22 169 181

*Households includes 5.3m households from Southern California Gas deal signed in April 2010 and National Grid USA transaction due to complete in August 2010

USA – maiden profit and gaining momentum

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The significant opportunity in the US gas utility market

• Achieved excellent results marketing with our new gas partners

SEMCO Energy and Piedmont Natural Gas

• Long term agreement with Southern California Gas (“SoCalGas”)

which adds a further 5m households to our household footprint

• We now have a total gas footprint of c.9m households and gas

related policies of 61,000

• Great opportunity to build on this success as we rollout marketing

with SoCalGas and National Grid this year

US natural gas market

• 63m households
• 1,100 gas utility companies, of which:

– the top 50 serve 70% of the market – 30 have home emergency programmes

• Home Service’s US gas footprint represents c.14%
• f the market*
• Looking to explore further opportunities with

utilities who provide a home emergency programme

*Includes National Grid transaction due to complete in August 2010

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National Grid transaction – a step change in the US

• Acquisition of National Grid Energy Services’ service contract business

for $14m (£9m)

• Addition of 186,000 customers and 365,000 policies
• 10 year marketing agreement with National Grid USA increases

marketing footprint by 5m

• Expected to contribute c. £19m and £3m in additional revenue and
• perating profit in FY11
• Expected to complete by the end of August 2010

National Grid Policies and Customers (‘000) April 2010 Heating 168 Cooling 37 Water heater 160 Total Policies 365 Marketable Households (m) 5.0 Core Renewable Customers (‘000) 186

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Households where nothing is offered M arket Potential Energy Utility branded contracts - in house Energy Utility branded contracts - 3rd party Water In House contracts HomeService contracts No contracts

• Achieved our goal of 20m households
• Over 50m households where no home assistance programme is offered – representing a big opportunity
• Continue to target partnerships with utilities including those with their own programmes
• Focus on organic growth, integration of National Grid and development of the utility pipeline which has a

number of good, well advanced opportunities

The US provides significant future growth potential

1.1m 1m 0.1m

119m Headroom 128m*

Graph not to scale Households served by a utility which offer some type of home assistance programme Households where the utility has no programme

69m 59m 59m 60m

Households where a programme is

• ffered

7m

*Households (m) 2007 US Census Bureau

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• A clear and focused membership-only strategy with the membership model having

been robustly tested

Focused strategy UK growth potential International development Financial flexibility

• Delivery of further customer growth in FY11 and beyond
• Growth from existing as well as new products and channels
• Focus on increased penetration in international markets by maximising potential of

household footprint

• Look to enter new markets in Europe
• Low levels of debt and strong cash generation provide capacity to make selective

acquisitions to either boost core business or enter new markets

Future prospects

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Gross revenue Underwriting Net Revenue Claims handling Reported revenue Sales and Service call centre

Gross revenue IPT Operating profit Under- writing Net revenue Reported revenue

AP comms

Claims handling Retail /

• ther

P&D

£95.8m

Chart is based on P&L for UK Membership for 12 months ending 31 March 2010

Core renewable customer revenue 2.9m customers x £82.2 income per customer = £236.4m AP comms

£286.7m

Grossing up revenue for partner commissions

Other costs and

• verheads*
• Inclusion of partner commissions as an expense rather than netting off against revenue
• Better representation of income and costs and consistent with technical accounting guidance
• No impact on profitability
• Increases UK and USA income and expenses in 2010 by £23.3m (2009: £20.4m)

£236.4m Graph not to scale *Includes marketing, sales and service call centre, claims handling, repair costs and overheads

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• Group net assets have increased from £213m to £234m
• The balance sheet remains strong with adequate headroom on facilities for membership development

Consolidated balance sheet highlights

As at 31 March (£million) 2010 2009 Goodwill 190.2 175.7 Other intangible assets 56.4 43.8 Property, plant and equipment 32.9 34.5 Interest in joint ventures 5.9 5.2 Total fixed assets 285.4 259.2 Net other assets/(liabilities) 15.5 (0.2) Deferred consideration (12.7) (14.4) Net (debt)/funds (52.9) (34.0) Deferred tax asset/(liability) 2.9 4.2 Pension obligations (4.2) (1.9) Net assets 234.1 213.0

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What is our US utility partnership coverage today?

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Global opportunity: how do our membership businesses compare?

Affinity Partner Households

5 10 15 20 25 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Years Households (m) UKM France USA Spain

Policies per Customer

0.0 0.5 1.0 1.5 2.0 2.5 3.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Years Policies per customer (x) UKM France USA Spain

Total Policies 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Years

Policies '000 UKM France USA Spain

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Global opportunity: how do our membership businesses compare?

Income per Customer

10 20 30 40 50 60 70 80 90 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Years £

UKM France USA Spain

Operating Profit

(10,000) 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 110,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Operating Profit, £'000

UKM France USA Spain

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This presentation has been prepared solely to provide additional information to shareholders as a body to assess the Company’s strategies and the potential for those strategies to succeed. This presentation contains certain forward-looking statements, which have been made in good faith, with respect to the financial condition, results of operations, and businesses of HomeServe plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. The statements have been made with reference to forecast price changes, economic conditions, the current regulatory environment and the current interpretations of IFRS applicable to past, current and future periods. Nothing in this presentation should be construed as a profit forecast.