Preliminary Results 2020 Richard Harpin Founder & Chief - - PowerPoint PPT Presentation

Preliminary Results 2020

homeserveplc.com

Richard Harpin

Founder & Chief Executive

Highlights

• Another successful year

– Revenue up 13% to over £1.1bn – Adjusted operating profit up 15% to £201.7m

• Strong performance across all our Me

Membership businesses – Successful launch in Japan

• 15 HVAC acquisitions to advance our buy and build strategy
• Productive year in Ho

Home Expe perts

• 10% increase in final dividend to 17.8p reflecting strong FY20

performance and confidence in our resilient business model.

7% 6% 87%

FY20 revenue split FY20 revenue split

HVAC Home Experts Membership

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Coronavirus response

Looking after our people

• Swift implementation of working from home for all 6,000
• ffice-based staff; gradual return to the office
• No furloughing or redundancies during current lockdowns.

Using spare capacity productively

• Innovation accelerated in HomeServe Now and Checkatrade.

Delivering for customers

• Over 2,000 jobs completed under free emergency repairs offer

for NHS and social care workers in the UK. Supporting trades

• Alternative membership options at Checkatrade.

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Click here to watch the video https://www.youtube.com/watch?v =Q1HQLqPUeYo

homeserveplc.com

David Bower

Chief Financial Officer

Divisional financial summary

Revenue Adjusted operating profit/ (loss) £million FY FY20 FY19 Δ% Δ% CC¹ FY FY20 FY19 Δ% Δ% CC¹

UK 37 372.9 391.7 (5)% (5)% 81 81.0 66.0 23% 23% North America 42 429.5 333.4 29% 25% 85 85.4 67.6 26% 23% France 111. 111.8 104.6 7% 8% 33. 33.8 33.3 1% 3% Spain 15 154.1 140.8 9% 11% 20 20.1 17.7 13% 16% New Markets – – – – (4 (4.7) (2.4) 91% 91% Home Experts 71 71.8 .8 40.4 78% 78% (13 (13.9) (7.4) 86% 86% Inter-segment (7 (7.8) (7.3) 6% 6% – – – – Group 1, 1,13 132.3 1,003.6 13% 12% 20 201.7 174.8 15% 15%

• £7.6m net exceptional charge (FY19: net exceptional gain of £4.6m)

– £3.8m gain from sale of Italian associate – £3.6m gain from acquisition of remaining 30% of Habitissimo – £15m charge associated with impairment of LeakBot.

homeserveplc.com ¹Constant currency: $1.31:£1 €1.13:£1

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Highly cash generative and well funded

£million FY20 FY19 Δ% Δ% CC¹

Adjusted EBITDA 275.3 221.9 24% 24% Net Debt (including IFRS 16 lease liabilities) 509.0 304.7 67% Net Debt : Adjusted EBITDA 1.8x 1.4x

£million FY20

Total gross debt 639 Less IFRS 16 leases (59) Gr Gross bank debt 58 580 Cash & cash equivalents (130) Ne Net Debt (exc. IFRS RS 16) 45 450 Total debt facilities (Bank & US Private Placements) 780 Headroom 330

Maturity profile £million

<1year 36 2-4 years 110 >4 years 634 78 780

• c.£330m headroom against available facilities
• Year end leverage of 1.8x in line with expectations
• Resilient, cash generative model.

homeserveplc.com ¹Constant currency: $1.31:£1 €1.13:£1

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304.7 450.8 509.0 275.3 9.2 44.1 12.4 30.2 18.5 79.0 6.9 148.3 8.4 73.5 11.5 11.8 2.9 58.1

Net Debt 31 March 2019 Adjusted EBITDA Non Cash Items Working Capital Repayment

• f lease

principal Tax Net Interest Capex -

• rdinary

Capex - policy book M&A M&A Italy sale Ordinary dividend Foreign exchange Net debt acquired Other Leases Net Debt 31 March 2020

Cash flow

• £93.4m free cash flow (FY19: £44.3m)
• £85.9m capex, £44.1m working capital absorption, in line with guidance
• Rigorous approach to capital investment; large capital projects coming to an end, prepared

& ready to act if suitable M&A targets become available.

homeserveplc.com Cash generated by operations £240.4m (FY19: £202.2m) Statutory Capex £85.9m (FY19: £115.7m)

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homeserveplc.com

Tom Rusin

Global CEO Membership

Membership – strong growth

• Sustainable growth in No

North Ame merica – 4.4m customers (+9%), 250 new partners – Two new partners since year end – 1.7m households – Acquisition of ServLine for $24.1m brings new channel and product opportunities – Two whole home acquisitions for $8.0m to inform total home warranty product launch.

• UK

UK profit growth driven by efficiency gains and value add

• Highest ever gross new customers in Fr

France (0.2m)

• Record number of jobs in Claims in Sp

Spai ain.

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HVAC – increasingly valuable

• c.100k new customers in FY20
• Revenue up 83% to £80.9m
• 15 HVAC acquisitions for a cash outflow of £25m across

North America, France and Spain

• Converting HVAC into an attractive Membership business

– Leverage Membership marketing expertise to turn service and repair customers into members – Cross-sell plumbing & electrics cover – Completing repairs for existing Membership customers.

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Current trading and outlook

• Membership business model remains resilient
• Solid performance at height of March and April lockdowns

– Cancellations and renewals in line with historic trends – Continued to provide high levels of service

• Membership cost base c. 1/3 variable
• More impact in HVAC but continue to complete

installations and repairs

• Solid outlook for FY21: continued growth in North

America; UK and France stable, reduced demand for Claims in Spain

• Milestone 2 targets for North America remain unchanged.

homeserveplc.com

61% 36% 3% No change More important Less important

So Source: April 2020 survey of HomeServe UK customers. 422 respondents.

Ho How important is your Ho HomeS eSer erve e cov cover now now com compared to

• a mont
• nth ago?

go?

66% 69% 50% I am more worried about home emergencies My home environment is more important than ever I'm more cautious at home to avoid things going wrong 8

homeserveplc.com

Richard Harpin

Founder & Chief Executive

29 36 39 16.1 17.9 23.6

• 20.0
• 10.0

0.0 10.0 20.0 30.0 10 20 30 40 50 FY18 FY19 FY20

Trades (k) Website Visitors (m)

22.4 29.8 38.5 839 930 1,023 5.0 15.0 25.0 35.0

• 200

400 600 800 1,000 FY18 FY19 FY20

Revenue (£m) ARPT (£)

FY20

• Increasing consumer awareness – 32% increase in

web visitors to 24m

• Trades up 9% and revenue up 30%.

Current trading

• Consumer demand now at c. 85% of pre-crisis level
• Trade membership holding up well, reaching 40k
• Supporting trades through the crisis
• Continuing to innovate – affiliate memberships to

drive trades recruitment, video quotations

• £10m+ net P&L investment in FY21; break even for

FY23

• Milestone 1 targets unchanged.

A productive year

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Progress across the rest of Home Experts

• Acquired remaining 30% of Ha

Habi bitissimo in June 2019 and appointed Sarah Harmon as CEO

–

Working with Membership & growing national accounts

• Profitable entry into Home Experts in North America with

eLoc eLocal al

–

Low risk affiliate model generating automated calls to trades

• New associate structure to expand Home Experts France
• Small to medium impact at Habitissimo; $10m+ adjusted
• perating profit expected at eLocal in FY21.

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Our purpose is to make home repairs and improvements easy. For both homeowners and trades.

Every job. Every home.

Home Experts Membership HVAC

Conclusion

• Resilient Membership model; continuing to build

Home Experts

• Key learnings

– Developing a full Membership model with HVAC – Potential for profitable entry into new markets – Opportunities from more regular home working – We employ great people; phenomenal response to the crisis

• Solid performance expected in FY21 with longer term

growth prospects and stated milestone targets unchanged.

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• Group financial performance
• Divisional KPIs and financial performance
• Membership

– UK – North America – France – Spain

• Home Experts

– Checkatrade – Habitissimo – eLocal

• Group balance sheet
• Group cash flow
• Foreign exchange
• IFRS 16
• Milestone targets
• Business model

Appendix

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homeserveplc.com

FY20 Group financial performance

£million FY20 FY19 Δ% Δ% CC¹

Total revenue 1,132.3 1,003.6 13% 12% Adjusted operating profit 201.7 174.8 15% 15% Interest (20.7) (13.1) 58% 57% Adjusted profit before tax 181.0 161.7 12% 12% Net Debt 509.0 304.7 67% Adjusted EBITDA 275.3 221.9 24% Net Debt : Adjusted EBITDA 1.8x 1.4x Adjusted earnings per share 41.3p 37.5p 10% Ordinary dividend per share 23.6p 21.4p 10%

• Currency benefit of c. £1.3m to adjusted operating profit
• Statutory PBT of £137.9m (down 1%) reflects net £7.6m exceptional charge
• 10% growth in DPS reflects strong FY20 performance and expected resilience in the year ahead.

¹Constant currency: $1.31:£1 €1.13:£1 homeserveplc.com

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Membership KPIs

UK

FY20 FY19 Change

Affinity partner households m 26 26 — Customers m 1.8 2.0

• 11%

Income percustomer £ 140 122 +15% Policies m 4.9 5.4

• 9%

Policies per customer 2.7 2.7 — Retentionrate % 78 79

• 1ppt

North America

FY20 FY19 Change

Affinity partner households m 64 60 +6% Customers m 4.4 4.0 +9% Income percustomer $ 102 96 +6% Policies m 7.5 6.7 +12% Policies per customer 1.7 1.7 — Retentionrate % 83 83 — France

FY20 FY19 Change

Affinity partner households m 18 18 — Customers m 1.1 1.1 +5% Income percustomer € 108 109

• 1%

Policies m 2.4 2.3 +2% Policies per customer 2.2 2.1 +1% Retentionrate % 89 89 — Spain

FY20 FY19 Change

Affinity partner households m — — — Customers m 1.0 1.1

• 13%

Income percustomer € 61 57 +8% Policies m 1.1 1.3

• 16%

Policies per customer 1.1 1.2

• 1%

Retentionrate % 83 80 +3ppts

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Home Experts KPIs

Checkatrade

FY20 FY19 Change

Trades k 39 36 9% Website hits m 23.6 17.9 +32% Habitissimo

FY20 FY19 Change

Trades k 24 28

• 13%

Website hits m 87.3 83.2 +5% eLocal (acquired November 2019)

FY20 FY19 Change

Paying trades k 3

• n/a

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Divisional results – local currency

UKP&L

FY20 FY19 Change

Totalrevenue £m 372.9 391.7

• 5%

Operatingcosts £m (291.9) (325.7)

• 10%

Adjusted operating profit £m 81.0 66.0 +23% Adjusted operating profitmargin % 22% 17% +5ppts North AmericaP&L

FY20 FY19 Change

Totalrevenue $m 546.1 436.2 +25% Operatingcosts $m (437.5) (348.1) +26% Adjusted operating profit $m 108.6 88.1 23% Adjusted operating profitmargin % 20% 20% — France P&L

FY20 FY19 Change

Totalrevenue €m 128.4 118.7 +8% Operatingcosts €m (89.4) (80.9) +11% Adjusted operating profit €m 39.0 37.8 +3% Adjusted operating profitmargin % 30% 32%

• 2ppts

SpainP&L

FY20 FY19 Change

Totalrevenue €m 176.6 159.7 +11% Operatingcosts €m (153.5) (139.9) +10% Adjusted operating profit €m 23.1 19.8 16% Adjusted operating profitmargin % 13% 12% +1ppt Home Experts P&L

FY20 FY19 Change

Checkatrade £m 38.5 29.8 +30% Habitissimo £m 11.1 10.6 +4% France £m 0.1 — — eLocal £m 22.1 — — Totalrevenue £m 71.8 40.4 +78% Operatingcosts £m (85.7) (47.8) +79% Adjusted operating loss £m (13.9) (7.4) +86% New Markets P&L

FY20 FY19 Change

Adjusted operating loss £m (4.7) (2.4) +91%

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Divisional results – sterling

UKP&L

FY20 FY19 Change

Totalrevenue £m 372.9 391.7

• 5%

Operatingcosts £m (291.9) (325.7)

• 10%

Adjusted operating profit £m 81.0 66.0 +23% Adjusted operating profitmargin % 22% 17% +5ppts North AmericaP&L

FY20 FY19 Change

Totalrevenue £m 429.5 333.4 +29% Operatingcosts £m (344.1) (265.8) +29% Adjusted operating profit £m 85.4 67.6 26% Adjusted operating profitmargin % 20% 20% — France P&L

FY20 FY19 Change

Totalrevenue £m 111.8 104.6 +7% Operatingcosts £m (78.0) (71.3) +9% Adjusted operating profit £m 33.8 33.3 +1% Adjusted operating profitmargin % 30% 32%

• 2ppts

SpainP&L

FY20 FY19 Change

Totalrevenue £m 154.1 140.8 +9% Operatingcosts £m (134.0) (123.1) +9% Adjusted operating profit £m 20.1 17.7 +13% Adjusted operating profitmargin % 13% 13% — Home Experts P&L

FY20 FY19 Change

Checkatrade £m 38.5 29.8 +30% Habitissimo £m 11.1 10.6 +4% France £m 0.1 — — eLocal £m 22.1 — — Totalrevenue £m 71.8 40.4 +78% Operatingcosts £m (85.7) (47.8) +79% Adjusted operating loss £m (13.9) (7.4) +86% New Markets P&L

FY20 FY19 Change

Adjusted operating loss £m (4.7) (2.4) +91%

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Group balance sheet

20 2020 20 2019 £m £m £m No Non-cu current assets 1, 1,148 148.5 930.4 Cu Current assets Inventories 7. 7.9 7.0 Trade and other receivables 49 495.4 424.6 Cash and cash equivalents 13 131. 1.2 72.6 To Total tal current t as assets ts 63 634.5 504.2 To Total tal as assets ts 1, 1,783.0 1,434.6 Cu Current liabilities Trade and other payables (4 (410.6) (382.3) Bank and other loans (4 (40.3) (39.7) Current tax liabilities (5 (5.4) (6.0) Lease liabilities (1 (14.1) (0.5) Provisions (2 (2.0) (5.7) To Total tal current t liab abiliti ties (4 (472.4) (434.2) Ne Net current assets 16 162.1 70.0 No Non-cu current liabilities Bank and other loans (5 (540.6) (336.4) Other financial liabilities (5 (52.3) (23.3) Deferred tax liabilities (2 (26.2) (26.4) Lease liabilities (4 (45.2) (0.7) (6 (664.3) (386.8) To Total tal liab abiliti ties (1 (1,136.7) (821.0) Ne Net assets 64 646. 6.3 613.6

20 2020 20 2019 £m £m £m No Non-cu current assets Goodwill 50 509.9 407.9 Other Intangible assets 49 497.1 418.6 Contract costs 16 16.8 27.5 Right-of-use assets 56 56.8

• Property, plant and equipment

42 42.0 42.8 Equity accounted investments 4. 4.0 10.6 Other investments 5. 5.6 9.2 Deferred tax assets 6. 6.0 7.4 Retirement benefit assets 10 10.3 6.4 1, 1,14 148.5 930.4

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Group cash flow

£million 2020 2019 Adjusted operating profit 20 201.7 174.8 Exceptional items (7 (7.6) 4.6 Amortisation of acquisition intangibles (3 (35.5) (26.8) Op Operatin ing profit it 15 158.6 152.6 Impact of exceptional items 7. 7.6 (4.6) Depreciation and amortisation 10 109.1 73.9 Non-cash items 9. 9.2 10.7 Increase in working capital (4 (44.1) (30.4) Ca Cash h generated by y operations 24 240.4 202.2 Net interest and associated borrowing costs (1 (18. 8.5) (9.9) Repayment of lease principal (1 (12.4) (0.6) Taxation (3 (30.2) (31.7) Capital expenditure - ordinary (7 (79.0) (66.9) Capital expenditure - acquisitions of policy books (6 (6.9) (48.8) Fr Free cash flow 93 93.4 44.3 Acquisitions of subsidiaries (1 (140.6) (37.5) Acquisition of non controlling interest (7 (7.7) – Acquisitions of investments – (5.4) Proceeds on disposal of equity accounted investments 8. 8.4 – Equity dividends paid (7 (73.5) (65.0) Purchase of own shares (3 (3.0) – Issue of shares (net of associated issue costs) 0. 0.1 2.2 Ne Net movement in cash and bank borrowings (1 (122.9) (61.4) Impact of foreign exchange and other non-cash items (1 (11.5) (5.4) Net debt acquired (1 (11.8) 8) (0.1) IFRS 16 lease liabilities acquired (3 (3.4) – Lease liabilities – adoption of IFRS 16 (5 (52.6) – Movement in IFRS 16 lease liabilities (2 (2.1) – Opening net debt (3 (304.7) (237.8) Cl Closing net debt (5 (509.0) (304.7)

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Foreign exchange

• Strong underlying performance with a small, favourable movement of £1.3m to adjusted
• perating profit
• A +/- 10 cent movement in the USD or Euro in FY20 would have had a c. £7.0m and £5.0m impact

respectively on adjusted operated profit.

Average exchange rate Effect on (£m)

• Adj. Operating

Revenue profit FY FY20 FY19 Change FY FY20 FY FY20 North America $ 1. 1.27 1.31 (3%) 12 12.1 2. 2.2 France € 1. 1.15 15 1.13 1% (1 (1.4) (0 (0.7) Spain € 1. 1.15 15 1.13 1% (1 (1.5) (0 (0.2) Home Experts € 1. 1.15 15 1.13 1% (0 (0.1) – Total 9. 9.1 1. 1.3

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IFRS 16

FY FY20

Interest charge on lease liabilities £(1.5)m Depreciation charge on right of use assets £(13.7)m Impact on adjusted EBITDA £13.5m Impact on net debt £59.3m Impact on leverage 0.1x

• No change to leverage policy as a result of IFRS 16 – continue to target 1.0x to 2.0x net debt to

adjusted EBITDA, measured at 31 March year ends.

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Our market by household targets Our market by value 1

30%

Insurance minded

1 Existing territories

Home repairs & improvements

£450bn

Home assistance

£14bn 50%

Home improvers

20%

DIY-ers

Expanding our market

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UK Membership income statement: FY20

‘gr gross revenue’ is the sum of total premiums paid by customers... ...we deduct associated un underwriting expenses and sa sales s ta taxes to reach reported Membership revenue or “net policy income” Policies are underwritten by independent third party underwriters which gives short term protection from a spike in claims costs or frequencies. The cost of sending an engineer in the UK is recorded in

• perating costs, “re

repair r network rk costs” and immediately recovered from the underwriter as “re repair r serv rvices” revenue... ...the UK P&L therefore has an element of zero margin revenue. In other businesses (North America, France, Spain) underwriting recovery is mostly transacted through the balance sheet and is not margin dilutive. The underwritten cost is that of “engineer, van and materials”. Other costs to handle the claim, deploy an engineer and back office functions to support these processes are all recorded in operating costs, as are the costs of ma marketing and the co commissions paid to utility partners for successful sales activity. £m £m 249.4 372.9 81.0 89.5 21.2 12.8

Gross revenue IPT Underwriting Net policy income Repair services HVAC Other Total revenue Repair network costs AP commisisons Marketing costs Call centres Overheads Adjusted

• perating

profit

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Milestone targets

No North th American Membership Mi Milestone 2 Che Checkatrade Mi Milestone 1

Addressable market c.43m insurance minded homeowners 1 c.600k trades Customer target 6 – 7m 150 – 200k Income per customer $120 – 125 £1,200 – 1,300 Margin 24 – 26% 25 – 35% HVAC contribution $30 – 45m – Adjusted operating profit $230m £45 – 90m

1 c.30% of c.144m North American households

• Seen as achievable in the medium to long-term
• ‘Business as usual’ milestones, not dependent on any transformational M&A.

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Guidance

Sol Solid per erfor

• rman

ance e ex expec ected ed in FY21

• Membership business, led by North America, is expected to show resilience, offsetting short-term

impact at Home Experts

• eLocal expected to generate $10m+ of adjusted operating profit in FY21
• Interest expense (FY20: £20.7m) to increase given the impact of M&A in FY20 and the higher net

debt balance carried into FY21

• Effective tax rate to remain at similar level (FY20: 23%) rising slightly in future years with a greater

proportion of profits earned overseas Lon Longer er term term grow rowth th pros rospec ects ts an and med edium to to lon

• ng-te

term rm mileston tone ta targ rgets ts unchanged

• Checkatrade expected to be break even for FY23
• Milestones for Checkatrade unchanged - £45m to £90m adjusted operating profit
• Milestones for North America unchanged - $230m of adjusted operating profit

Ot Othe her

• Ordinary capital expenditure (FY20: £79m) expected to fall slightly in FY21.

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Contacts

Mi Miriam Mc McKay Group Communications and IR Director Miriam.McKay@homeserve.com +44 7795 062564 Dam Dami Tan animow

• wo

Senior Investor Relations Manager Dami.Tanimowo@homeserve.com +44 7747 761155

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