FY20 Results Ian Mason, CEO Joe Fitzgerald, Interim CFO 15 July 2020
About D&G
D&G protects domestic appliances D&G is a large, high service, international business With a strong and resilient position in the home Specialist B2B2C service provider with unique capabilities 8.3m 11 5.5m Subscription Countries Subscription Plans Customers Subscription business with high renewal rates 2.4m 89% 0.5m Exclusive partnerships covering 95% of UK white good OEMs Repairs p.a. Replacements p.a. Customer Satisfaction 81% 98% 66 1 st time fix 2 nd time fix NPS Domestic & General | Confidential 3 All data points FYE March 2020. Management information
Unique B2B2C partnerships Differentiated Approach Symbiotic Ecosystem Exclusive, long-term contracts High policy volumes from unique distribution platform Trusted brand and customer custodian Service Advantage Subscriptions Symbiotic: significant partner value created Retailers OEMs Commission, Incremental repairs & Positive network effects strengthen proposition Commission Replacements Customer Service & Hard to replicate, with high exit costs Cost advantage Domestic & General | Confidential 4
Multiple opportunities to drive strong growth and higher profitability D&G has a portfolio of growth businesses Each business has a clear growth strategy Illustrative Profitability UK Growth with margin expansion International Digitalisation Replication of UK business model UK US US contract signed with Whirlpool US International 0 Digital Digitalisation programme accelerated Maturity Domestic & General | Confidential 5
FY20 Performance
FY20 - Key Messages Financial Performance • Year-on-year growth in underlying revenues and underlying EBITDA • Growth in subscription revenues in both our UK and International businesses Operational Progress • Real progress on Digital transformation programme ‘DGX’ • Contract to expand into the US market with Whirlpool signed • Strategy review for new investment cycle completed Capital Structure • Refinancing and new investment from ADIA and CVC Fund VII completed • Ancillary Own Funds application approved by the PRA in February Confidential 7
Revenues 12m to 31 st March FY 20 FY 19 Change Subscription UK 628.1 601.8 4.4% Revenue • Good growth in subscription revenue +4% 1 International 66.9 63.8 4.8% • Non-subscription revenue decreases in-line 2 Group Subscription Revenue 695.1 665.7 4.4% 1 with strategic focus on subscription business • International underlying revenue impacted by Subscription UK 56.1 62.4 -10.1% 3 Revenue run-off of business in Germany and Spain; +7% Non- International 79.6 83.2 -4.3% on a continuing basis Group Non-Subscription Revenue 135.7 145.6 -6.8% 2 • Stable, high renewal rates from subscription 4 base driving growth in underlying revenue +2% Underlying UK 684.3 664.2 3.0% Revenue 1 International 146.5 147.1 -0.4% 3 Underlying Revenue 1 4 830.8 811.3 2.4% 1 Underlying revenue represents revenue after the reversal of fair value adjustments associated with acquisition accounting Domestic & General | Confidential 8
Consistent financial performance 75.9% Revenue from Renewals International Share of UK Share of Revenue 74.9% 32.1% 73.9% from Renewals 72.0% 28.0% 24.4% 21.9% 66.7% 19.6% FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 Group Subs Revenue / 83.7% Underwriting Costs / Underlying Revenue Underlying Revenue 82.1% 68.4% 68.0% 67.7% 66.7% 66.3% 79.0% 77.4% 76.7% FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 Domestic & General | Confidential 9
Underlying EBITDA £106.9m £104.6m 2.2% YoY Growth • Group underlying EBITDA +2%, driven by 8.4 8.4 embedded revenue growth from high subscription renewal rates in our UK business, Underlying EBITDA (£m) stable cost ratios, and predictable claims and acquisition costs. • EBITDA growth affected by investments in 98.5 96.2 Digitisation and Customer First programmes • International underlying EBITDA flat YoY due to lower investment income following the sale of investments in Q1 FY20 as part of the refinancing FY19 FY20 UK International 1 Includes holding company costs 2 Restated to reflect retrospective adoption of IFRS16 : Leases Domestic & General | Confidential 10
Underlying EBITDA Summary Cash Flow • Underlying EBITDA for the UK and International segments, after holding company costs and reflecting adoption of IFRS 16 (comparative restated) 12m to 31 st March FY 19 1 FY 20 Change Unregulatedbusiness Underlying EBITDA 106.9 104.6 2.2% • Maintaining capital expenditure at FY 19 levels • Working capital outflows reflect the unwind of the negative Less: Regulated Business Adjusted EBITDA (42.5) (39.1) 8.7% working capital position associated with plans transferred to Unregulated Business Adjusted EBITDA 64.4 65.5 the regulated business and timing differences in non- policyholder working capital balances Capital expenditure (19.8) (19.9) -0.8% Regulated business Change in working capital (28.6) (19.3) 48.6% • Distributable reserves comprise net income of regulated Unregulated Business Free Cash Flow 16.0 26.3 business before significant items and as adjusted for changes in capital requirements and Solvency II valuation differences Increase in Distributable reserves inRegulated Business 75.2 43.5 73.1% • FY 20 benefitting from approval of Ancillary Own Funds Group Free Cash Flow 91.2 69.8 30.7% application of £30m by PRA in February Conversion 85.3% 66.7% Tax paid Tax paid (11.8) (4.8) • Tax paid in FY20 impacted by change in instalment methodology in the UK for ‘very large’ companies (estimate of Post-Tax Free Cash Flow 79.4 65.0 22.3% tax liability now payable in full within the year; previously, this was paid half in advance and half in arrears. NB: tax liability unchanged, but payment has been bought forward) • Lower tax paid in FY 19 reflects allowable deduction of one-off product transition costs of £37.3m recognised in FY 18. 1 Restated to reflect retrospective adoption of IFRS16 : Leases Domestic & General | Confidential 11
Capitalisation Q4 FY20 Q3 FY20 Multiple of Multiple of EBITDA EBITDA £m Maturity Price £m Maturity Price 0.7x Apr-26 0.3x Apr-26 1 Drawn Super Senior RCF* 77.5 3m LIBOR + 3% 33.5 3m LIBOR + 3% Senior Secured FRN (€200m) 180.6 1.7x Jul-26 1.7x Jul-26 Euribor + 5.00% 180.6 Euribor + 5.00% 2 2.9x Jul-26 2.8x Jul-26 Senior Secured Notes 305.0 6.50% 305.0 6.500% 5.3x 4.8x Total Super and Senior Secured Debt 563.0 519.1 1.4x Jul-27 1.4x Jul-27 2 Senior Notes 150.0 9.250% 150.0 9.250% 6.7x 6.2x Total Bonds 713.0 669.1 3 Lease liabilities 10.7 7.8 6.8x 6.3x Total Gross Debt 723.7 676.9 Unrestricted cash reserves** (99.1) (25.8) 4 5.8x 6.1x Total Net Debt 624.6 651.0 Apr-26 Apr-26 Undrawn Super Senior RCF 0.0 43.5 • £85.0m super senior revolving credit facility full drawn* during FY20 except for £3.0m available for same day drawdown to increase liquidity in 1 the current uncertain environment. At the end of FY20, there was an on-demand letter of credit under the Facility in favour of the PoS Trust for £5.0m • Refinancing of external debt during Q2 FY20 increased gross bond debt from £475.1m to £635.6m 2 3 • Lease liabilities have been included to reflect the adoption of IFRS 16 Leases • Leverage calculated on basis of underlying adjusted LTM EBITDA of £106.9m (Q3 FY20 £107.3m) 4 * Included within the drawn RCF balance at both Q3 and Q4 FY20 is a €10.0m drawdown which is translated into GBP at the closing exchange rate at the respective Balance Sheet dates ** £30m Ancillary Own Funds application for the UK regulated business was approved by the PRA in February 2020 and is included in the unrestricted cash reserves Confidential 12
COVID trading update
Revenues are resilient due to the nature of the business model Subscription Revenue Customer Retention Cash New Total Revenue 16% Business 21% Ave >85% Renewals Subscription 79% 84% FY12 FY20 Subscription is profit generating; cash is Consistent renewals retention performance The majority of our subscriptionrevenues marginal are from our renewal book leads to compounding growth… Subscription Revenue • When assessing short term performance Subscription Plans New Business the best indicators are new business and POS 24% renewal plans sold in the period • Lower volumes sold will eventually PPOS translate to revenue in future accounting 76% periods as revenues are released FY12 FY20 • Indeed total revenues have grown year on year in Q1 by c. 2% with subscription The majority of new business sales are revenues increased c. 5% …and growing subscription revenues generated post point of sale (PPOS) Confidential 14
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