Interim results 20 November 2018 Richard Harpin Founder and Chief - - PowerPoint PPT Presentation

Interim results

20 November 2018

Richard Harpin

Founder and Chief Executive

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homeserveplc.com

Highlights

• Group revenue and profjt up 10% in seasonally quieter fjrst half
• Good progress in all of our operating businesses

– North America customer growth of 19% and profjt growth of 28% to $18.9m – 11% profjt growth in the UK to £10.2m, and three challenger energy companies signed – In France, key partnership with Veolia extended until 2026

• Excellent progress at Checkatrade: new leadership team, Trades recruitment, consumer visits and

revenue growth.

Unless otherwise stated, all references to profjt refer to Adjusted Operating Profjt.

David Bower

Chief Financial Offjcer

homeserveplc.com

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£million (unless stated) HY19 HY18 Δ% Δ% CC 1

Revenue 404.3 366.0 10% 11% EBITDA 60.5 56.1 8% 9% Adjusted operating profjt 37.1 35.3 5% 7% Adjusted profjt before tax 31.8 29.0 10% 12% Net debt 291.9 304.0 (4)% Net debt: LTM EBITDA 1.4x 1.9x (0.5)x Adjusted earnings per share 7.5p 6.8p 10% Ordinary dividend per share 5.2p 4.7p 11%

Group financial summary

1 Constant currency $1.30 : £1, €1.14 : £1

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homeserveplc.com

Divisional financial performance

Revenue Adjusted operating profjt/(loss) £million HY19 HY18

∆% ∆% CC1

HY19 HY18

∆% ∆% CC1 UK 155.7 142.8 9% 9% 10.2 9.1 11% 11% North America 130.5 117.8 11% 14% 14.0 11.4 22% 28% France 36.8 35.3 4% 4% 7.5 9.4 (20)% (17)% Spain 65.8 67.6 (3)% (3)% 8.6 7.9 9% 9% New Markets 18.2 5.4 238% 237% (3.2) (2.5) 28% 28% Inter-segment (2.7) (2.9) (5)% (5)% — — — — Group 404.3 366.0 10% 11% 37.1 35.3 5% 7%

1 Constant currency $1.30 : £1, €1.14 : £1

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homeserveplc.com

Cash flow performance and capital structure

Net debt 31 March 2018 EBITDA Non- cash items Working capital Capex Ordinary dividend Tax Net interest Foreign exchange Other Underlying net debt Infmow Outfmow M&A Net debt 30 September 2018

£60.5m £237.8m £4.3m £4.3m £30.4m £47.8m £11.3m £5.1m £2.7m £17.6m £274.3m £291.9m £0.3m

Cash generated by operations £60.5m

• Full year cash conversion expected to exceed 100%
• Funding headroom of £200m+
• 1.4x leverage within target range of 1.0x to 2.0x net debt: EBITDA

homeserveplc.com

• £30m ordinary capex

– £9m partner payments – £21m investment principally to improve the customer journey and drive network effjciency

• Modest reduction expected in full year vs. £71m in FY18
• Further reduction in capex in FY20

Capital expenditure

• Partner payments ● Underlying / Technology
• Guidance

FY18

16 55

FY19 FY20 HY18

9 29

HY19

9 21

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Tom Rusin

CEO Membership

• Adjusted operating profj

t up 11% to £10.2m

• Customer book stable at 2.1m ex acquisitions
• Value of customer book increasing

– Average policies per customer up 8% to 2.7 – £12 increase in net income per customer – Claims up 8% to 0.5m

• Three new challenger energy partners.

UK – improved performance

Customers (m) and retention rate HY17 HY18 HY19

2.2 2.2 2.1

80% 80% 79% Adjusted operating profj t (£m) HY17 HY18 HY19

21.2 9.1 10.2

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France – expanded Veolia partnership

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• Reduction in adjusted operating profj

t due to increased business development activity

• Good progress on HVAC
• Veolia partnership extended to 2026 with scope for new

marketing channels

• Strong new partner pipeline.

Customers (m) and retention rate HY17 HY18 HY19

1.0 1.0 1.1

89% 89% 88% Adjusted operating profj t (€m) HY17 HY18 HY19

9.7 10.3 8.6

• Adjusted operating profjt up 9% to €9.8m
• Expected reduction in customers following end of Endesa partnership
• Retention rate increasing
• First steps in HVAC with acquisition of Oscagas
• Good business development pipeline in both Membership & Claims.

Spain – laying foundations for new growth

HY17 HY18 HY19

1.2 1.3 1.2

77% 78% 80% HY17 HY18 HY19

5.9 9.0 9.8

Customers (m) and retention rate Adjusted operating profjt (€m)

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North America – further growth

Customers (m) and retention rate Adjusted operating profjt ($m)

• Customers up 19% to 3.7m

– 10% organic growth – 9% growth from Tranche 1 of Dominion Products & Services (DPS) (October 2017)

• 74 new partners taking total to over 600
• Tranche 2 of DPS completed as planned on 26 October 2018 – adds

200k customers and 3m households

• 28% increase in adjusted operating profjt to $18.9m

HY17 HY18 HY19

(1.6) 14.7 18.9

homeserveplc.com

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HY17 HY18 HY19

2.8 3.1 3.7

81% 82% 83%

North America – more growth to come

• Partnership signings - success breeds success
• 55,000 potential partners - utilities, municipalities and retail energy

providers

• Continuous improvement to customer service
• $160m adjusted operating profj

t a key milestone, not the end point...

¹ Capital Markets Day June 2016 ² Pro forma refm ects post half-year movements including DPS and new household additions

homeserveplc.com

CMD 2016 ¹ Pro forma 2 Future Households (m) 32 58 80 Partners <100 600+ n/a Customers (m) 2.3 3.8 8.0 Net income per customer ($) 91 93 100 Adjusted operating margin 8% n/a 20% Adjusted operating profj t ($m) 17.5 n/a 160

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Membership - substantial opportunity to expand

homeserveplc.com

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514 customer reviews AS OF 24/Sep/2018

Existing Partnerships On Demand Insurance-minded Target Partnerships DIY 30%

75m households Addressable market – 250m households in 5 markets

97m 50% 153m 20%

HVAC – attractive adjacent market

• Relevant to 100% of homeowners
• Aim to replicate our success in North America
• Disciplined buy and build strategy

– Well-established, trusted local business – Profj table – Focused on residential properties – Portfolio of contracted customers – Balance of maintenance and installation – Good management team

• Virtuous circle accessed by installations
• Clear synergies with our Membership business.

homeserveplc.com

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HVAC Virtuous Circle

Installations On demand repair Service Policy Membership

Richard Harpin

Founder and Chief Executive

Strong leadership and organisation structure

homeserveplc.com

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David Bower

CFO

Mike Fairman

CEO Checkatrade

Jordi Ber

CEO Habitissimo

Craig Foster

LeakBot

Tom Rusin

Global CEO Membership

Deb Dulsky

MD Global HVAC

Guillaume Huser

CEO France

Frederique Torres

HVAC France

John Kitzie

CEO North America

Vacancy

HVAC North America

Fernando Prieto

CEO Spain

Pedro Fernandez-Olano

HVAC Spain

Greg Reed

CEO UK

John Hunter

HVAC UK

H Stephen Philips

CEO International

Internal promotion External hire Richard Harpin

Founder & CEO

Membership Home Experts Smart Home International Development HVAC

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homeserveplc.com

1 trade for every

2,000

homes

1 trade for every

150 homes

Target 200,000 trades

200k 31k 24k 2.4k <500

Checkatrade: Increasing Trades supply and monetisation

Sep 98 Sep 08 Dec 16 @ Acquisition Sep 18 Future

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homeserveplc.com

Average subscription per year £

Checkatrade: Increasing Trades supply and monetisation

Buying club

£867 £770 £500 <£250

• Sep 98

Sep 08 Dec 16 @ Acquisition Sep 18 Future

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homeserveplc.com

Growing consumer demand

4m reviews posted TV advertising increased New pilot territory in Lyon, powered by Habitissimo Leaflet coverage 30% to 80%

homeserveplc.com

Smart Home

LeakBot

• Further progress on creating a subscription-based commercial model
• Customers are home insurers

– Costs associated with water damage are a £25bn p.a. global problem

• 75,000 units sold
• 10 active insurer partnerships, which we are looking to expand into

larger deals

• Testing now live in the US.

BoilerBot

• Pro-active fault diagnosis and appointment scheduling.

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• A good six months, inspiring confjdence for the full year
• Strengthened and experienced management team
• Four attractive, recurring income businesses
• Strong fjnancial position
• Exciting opportunities

– Strong affjnity partner pipeline across Membership – HVAC buy and build taking shape – Step change at Checkatrade – Commercial traction with LeakBot – Good progress on new country openings.

Every Job. Every Home.

Our vision is to be the world’s most trusted provider of home repairs and improvements.

Summary and outlook

homeserveplc.com

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Home Experts Smart Home Membership HVAC

• Divisional KPIs
• Divisional results – local currency
• Divisional results – sterling
• Group balance sheet
• Group cash fmow
• Foreign exchange impact
• Our home assistance fjnancial business model

Percentage movements throughout this Appendix are based on full underlying results, not the rounded fjgures in the tables. The Group’s results are being reported under IFRS9 and IFRS15 for the fjrst time in 2018 following the mandatory adoption of the standards from 1 April 2018. In accordance with the transitional provisions of the standards, comparatives have not been restated.

Appendix

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homeserveplc.com

Divisional KPIs

UK

HY19 HY18 Change

Affjnity partner households m 26 24 +8% Customers m 2.1 2.2 (3)% Income per customer £ 109 97 +13% Policies m 5.8 5.5 +5% Policies per customer 2.7 2.5 +8% Retention rate % 79 80

• 1ppt

France

HY19 HY18 Change

Affjnity partner households m 15 15 — Customers m 1.1 1.0 +1% Income per customer € 108 103 +5% Policies m 2.3 2.3 (2)% Policies per customer 2.3 2.3 — Retention rate % 88 89

• 1ppt

North America

HY19 HY18 Change

Affjnity partner households m 55 53 +5% Customers m 3.7 3.1 +19% Income per customer $ 93 97 (4)% Policies m 5.9 4.8 +23% Policies per customer 1.5 1.5 — Retention rate % 83 82 +1ppt Spain

HY19 HY18 Change

Affjnity partner households m 12 (100)% Customers m 1.2 1.3 (7)% Income per customer € 51 46 +12% Policies m 1.4 1.5 (5)% Policies per customer 1.2 1.1 +1% Retention rate % 80 78 +2ppts

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homeserveplc.com

Divisional results – local currency

UK P&L

HY19 HY18 Change

Total revenue £m 155.7 142.8 +9% Operating costs £m (145.5) (133.7) +9% Adjusted operating profjt £m 10.2 9.1 +11% Adjusted operating profjt margin % 7% 6% +1ppt North America P&L

HY19 HY18 Change

Total revenue $m 173.7 152.3 +14% Operating costs $m (154.8) (137.6) +13% Adjusted operating profjt $m 18.9 14.7 +28% Adjusted operating profjt margin % 11% 10% +1ppt France P&L

HY19 HY18 Change

Total revenue €m 41.6 40.1 +4% Operating costs €m (33.0) (29.8) +11% Adjusted operating profjt €m 8.6 10.3 (17)% Adjusted operating profjt margin % 21% 26%

• 5ppts

Spain P&L

HY19 HY18 Change

Total revenue €m 74.4 76.9 (3)% Operating costs €m (64.6) (67.9) (5)% Adjusted operating profjt €m 9.8 9.0 9% Adjusted operating profjt margin % 13% 12% +1ppt

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homeserveplc.com

Divisional results – sterling

UK P&L

HY19 HY18 Change

Total revenue £m 155.7 142.8 +9% Operating costs £m (145.5) (133.7) +9% Adjusted operating profjt £m 10.2 9.1 +11% Adjusted operating margin % 7% 6% +1ppt North America P&L

HY19 HY18 Change

Total revenue £m 130.5 117.8 +11% Operating costs £m (116.5) (106.4) +10% Adjusted operating profjt £m 14.0 11.4 +22% Adjusted operating margin % 11% 10% +1ppt France P&L

HY19 HY18 Change

Total revenue £m 36.8 35.3 +4% Operating costs £m (29.3) (25.9) +13% Adjusted operating profjt £m 7.5 9.4 (20)% Adjusted operating margin % 20% 27%

• 7ppts

Spain P&L

HY19 HY18 Change

Total revenue £m 65.8 67.6 (3)% Operating costs £m (57.2) (59.7) (4)% Adjusted operating profjt £m 8.6 7.9 +9% Adjusted operating margin % 13% 12% +1ppt

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homeserveplc.com

Group balance sheet

£million

HY19 HY18 Non-current assets Goodwill 396.0 324.8 Intangible assets 355.7 292.2 Contract costs 34.8 — Property, plant and equipment 39.8 37.3 Interests in associates 5.8 32.9 Other investments 9.5 8.7 Deferred tax assets 6.6 9.0 Retirement benefjt assets 7.3 2.1 855.5 707.0 Current assets Inventories 5.5 3.5 Trade and other receivables 484.5 382.1 Cash and cash equivalents 55.5 63.8 Total assets 1,401.0 1,156.4 Current liabilities Trade and other payables 465.7 381.9 Current tax liabilities 0.9 5.1 Obligations under fjnance leases 0.5 0.5 Bank and other loans 36.3 38.0 503.4 425.5 Net current assets 42.1 23.9 Non-current liabilities Bank and other loans 310.3 328.6 Other fjnancial liabilities 22.2 22.7 Deferred tax liabilities 25.7 22.5 Obligations under fjnance leases 0.3 0.7 Total liabilities 861.9 800.0 Net assets 539.1 356.4

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homeserveplc.com

Group cash flow

£million HY19 HY18

Adjusted operating profjt 37.1 35.3 Amortisation of acquisition intangibles (12.5) (7.8) Operating profit 24.6 27.5 Depreciation and amortisation 35.9 28.6 Non cash items 4.3 3.3 Increase in working capital (4.3) (6.7) Cash generated by operations 60.5 52.7 Net interest (5.1) (6.0) Taxation (11.3) (9.4) Capital expenditure (30.4) (37.7) Repayment of fjnance leases (0.1) (0.3) Free cash flow 13.6 (0.7) Acquisitions of subsidiaries (17.6) (9.6) Equity dividends paid (47.8) (35.0) Issue of shares 0.3 0.1 Net movement in cash and bank borrowings (51.5) (45.2) Impact of foreign exchange (2.7) 2.3 Finance leases 0.1 0.3 Opening net debt (237.8) (261.4) Closing net debt (291.8) (304.0)

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homeserveplc.com

Foreign exchange

• Strong underlying fjrst half performance with unfavourable movement of £0.5m to adjusted operating profjt due to

FX movements

Efgect on (£m) Average exchange rate Revenue

• Adj. operating profjt

HY18 HY17 Change HY18 HY18

North America $ 1.33 1.30 2% (3.9) (0.6) France € 1.13 1.14 (1)% 0.2 — Spain € 1.13 1.14 (1)% 0.4 0.1 New Markets € 1.13 1.14 (1)% — — Total International (3.3) (0.5)

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homeserveplc.com

Financial business model

Our UK business model - Year ended 31 March 2018

Gross revenue IPT Underwriting Net revenue Other income Repair network revenue Reported revenue Repair network costs AP commissions Marketing costs Contact centres Overheads Adjusted

• perating

profjt £222m £38m £106m £366m £61m

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homeserveplc.com

Contacts

HomeServe Miriam McKay Group Communications and IR Director Miriam.McKay@homeserve.com +44 7795 062564 Simon Lewis Head of Investor Relations Simon.Lewis@homeserve.com +44 7970 840694 Tulchan Group Martin Robinson Lisa Jarrett-Kerr homeserve@tulchangroup.com +44 207 353 4200