homeserveplc.com
An introduction to HomeServe
homeserveplc.com
Our market by value**
*This reflects HomeServe’s historic experience in each of its mature geographic markets**Market value of HomeServe’s existing territories only – UK, North America, France and Spain
Home repairs &improvements
£450bn
Home assistance
£14bn
30%*
Insurance minded
50%Home
improvers
20%DIYers
To make home repairs and
improvements easy
HomeServe has a clear sense of purpose, which drives everything we do
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Our market: homeowners
Want to avoid the disruption of dealing with a problem in their home. Like to budget carefully and avoid unexpected
repair bills.
Will deal with problems and improvements in the home as and when they
arise, often seeking solutions online.
Have the knowledge and skills to do home repairs
themselves, but sometimes need a
specialist.
A stable market predominantly covering plumbing, heating and electrics.
A broader market and an expanding market, with more trades types arising to serve modern homeowners.
Our purpose
Home repairs & improvements market
Home assistance market
homeserveplc.com
The competitive environment
We reach homeowners through two complementary global business lines, enabling strong competitive positioning
2
Insurance minded DIYers Home improvers
Membership & HVAC Home Experts
Membership & HVAC Home Experts
Description
• Membership, the business which HomeServe has operated since our beginnings in 1993, appeals to insurance-minded homeowners and currently delivers all of the Group’s profits with established businesses in the UK, North America, France and Spain.
• We are building our Heating, Ventilation & Air-conditioning (HVAC) capabilities in the Membership territories, to be able to replace equipment for customers as well as repair and service it.
Growth drivers
• New partnerships.
• Effective marketing.
• Product design.
Description
• Home Experts is a more recent offering, enabling HomeServe to cater for homeowners who go online to find a local trade to help with their home repairs and improvements.
• We are developing three online platforms – Checkatrade (UK), eLocal(North America) and Habitissimo(Spain & LATAM).
Strategic initiatives
• Refining the winning model, “Directory Extra”, with learnings from each platform.
Developing the capabilities and services to be able to do every job, in every home
homeserveplc.com
FY20 Milestone 1
Trades 39,000 +9% 150,000 – 200,000
Average revenue per trade £1,023 +10% £1,200 – £1,300
Margin – 25% – 35%
Adjusted operating profit – £45m – £90m
Membership North America
FY20 Milestone 2
Customers 4.4m +9% 6m – 7m
Income per customer $102 +6% $120 – $125
Margin (policies) 20% 0ppts 24% – 26%
HVAC profit <$5m $30m – $45m
Adjusted operating profit $109m +23% $230m
Both business lines have significant growth opportunities, attached to which are stretching medium term targets
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Business model remains resilient in the face of the COVID-19 pandemic
Current trading• Membership remains strong - retention rates in line with
pre-crisis levels and continuing to provide high levels of service for customers who value their cover.
• Home Experts initially more impacted; consumer demand swiftly returned and trades network preserved.
Looking after our people• Swift implementation of working from home for all 6,000
office-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 3,000 jobs completed under free emergency repairs
offer for NHS and social care workers in the UK.
• Innovations which will continue beyond the pandemic –video quotes, remote telefix and affiliate membership of Checkatrade.
61%
36%
3%
No change
Moreimportant
Lessimportant
Source: April 2020 survey of HomeServe UK customers. 422 respondents.
How important is your HomeServe cover now compared to a month ago?
66% 69%
50%
I am moreworried about
homeemergencies
My homeenvironment ismore important
than ever
I'm morecautious at home
to avoid thingsgoing wrong
homeserveplc.com
• Attractive, subscription based businesses
– Membership retention rate of 82% creates predictability.
– Underwritten model for claims removes volatility.
• Highly cash generative
– FY20 free cash flow of £93m.
– Capital light model drives efficient capital usage.
– Benefits of scale as we grow.
• Disciplined approach to investment.
• Well financed - £330m of headroom against facilities.
HomeServe has a sound financial profile
5
£million FY20
Total gross debt 639
Less IFRS 16 leases (59)
Gross bank debt 580
Cash & cash equivalents (130)
Net Debt (exc. IFRS 16) 450
Total debt facilities (Bank & US Private Placements) 780
Headroom 330
Maturity profile £million
<1year 36
2-4 years 110
>4 years 634
780
homeserveplc.com
• Policies that cover all the major home systems.
• Most with no deductibles.
• Solves the problem of something going wrong in the home with one call or click.
• Whole home cover or à la carte.
• Extremely stringently screened technicians.
• Highest customer satisfaction in the industry.
• Partner with utilities and municipalities to offer policies.
Our Membership & HVAC offering attracts insurance-minded customers
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Membership saw profit growth in all markets in FY20, led by North America
• Sustainable growth in North America
– 4.4m customers (+9%), 250 new partners.
– Two large 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 profit growth driven by efficiency gains and value add.
• Highest ever gross new customers in France (0.2m).
• Record number of jobs in Claims in Spain.
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HVAC will make an increasingly valuable contribution to Membership
• c.100k new customers in FY20, half of which organic.
• 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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HomeServe Now offers a way to revolutionise service delivery
Now
Get free local trade jobs, sent straight to your phone
• Ambition to do for home emergencies what Uber and Lyft have done in the taxi market.
• Takes existing good customer service proposition and delivers digitally (through app & IVR).
• Large scale testing launched in the UK in June 2020.
• Opportunity to drive efficiencies in the cost base through lower claims handling and job costs.
• Further opportunity to target non-insurance minded consumers with a subscription product which gives access to technology and low cost repairs.
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Opportunities exist to take the Membership offering to new territories
Japan
• HomeServe Japan established in February 2019 – joint venture with Mitsubishi Corporation.
• First utility partnership signed with Chugoku Electric in January 2020.
• Chugoku partnership gives access to their customer base of 2.9m households.
• Active discussions ongoing with other Japanese utilities.
homeserveplc.com
A market ready to move online Directory Extra user experience - preferred model
“I want a trade that…” Trades - easy to join and stay
8% conversionvisits into
jobs0%
10%
20%
30%
40%
50%
60%
Directo
ry
Lead genera
tion
No pre
fere
nce
Checks and Reviews
Availability
Price Visibility
“can do the workwhen I need it done”
“I can trust”
“will charge mea reasonable rate”
No risk
Pay only if we deliver value
No 12 month commitment
Open, transparent& fair pricing model
Monthly rolling contract- just like Netflix
Proof of value with secure contacts
Flex visibility
0
20
40
60
80
100
Trades Property Cars Travel
% of consumers using online platforms to start their search for…
In Home Experts, we are focused on developing the winning model for tradespeople and consumers
11Affiliate membership and “claim
your listing”
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FY20 highlights
• Increasing consumer awareness
– Refreshed website with added functionality.
– Successful TV advertising campaigns.
– 32% increase in web visitors.
• Trades up 9% and revenues up 30%
– Initiatives to share consumer interest more fairly amongst existing and new members.
– 42% increase in calls to trades with a presence in directory leaflets.
• Break-even expected for FY23; one year delay due to impact of COVID-19.
2936 39
16.1 17.9
23.6
-20.0
-10.0
0.0
10.0
20.0
30.0
0
10
20
30
40
50
FY18 FY19 FY20
Trades (k) Website Visitors (m)
22.429.8
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 (£)
homeserveplc.com
Home Experts beyond the UK
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• Acquired remaining 30% of Habitissimo in June 2019 and appointed Sarah Harmon as CEO
– Working with HomeServe Spain & growing national accounts.
• Profitable entry into Home Experts in North America with eLocal
– Low risk affiliate model generating automated calls to trades.
• New associate structure to expand Home Experts France.
• FY21: COVID-19 had a small to medium impact at Habitissimo; $10m+ adjusted operating profit expected at eLocal.
homeserveplc.com
Our purpose is to make home repairs and
improvements easy.
For both homeowners and trades.
Home ExpertsHVAC
Every job. Every home.
Membership
• Resilient Membership model
– Improving and transforming customer service.
– Expanding affinity partnerships.
– New products and channels.
– New territories e.g. Japan.
• Developing a world-leading Home Experts model.
• Disciplined investment decisions.
• Investing in our people to provide management capability to support growth.
Summary
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homeserveplc.comhomeserveplc.com
Appendix
• FY20 Group financial summary
• FY20 Divisional financial performance
• Guidance
• FY20 Membership KPIs
• FY20 Home Experts KPIs
• FY20 Cash flow performance
• Explainer: Our UK home assistance financial business model
• Explainer: Working capital
• Contacts
• Forward looking statements
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homeserveplc.com
1 Constant currency $1.31 : £1, €1.13 : £1² Adjusted items are calculated excluding exceptional items, the amortisation of acquisition intangibles and the associated tax impacts
£million FY20 FY19 Δ% Δ% CC¹
Total revenue 1,132.3 1,003.6 13% 12%
Adjusted operating profit² 201.7 174.8 15% 15%
Interest (20.7) (13.1) 58%
Adjusted profit before tax² 181.0 161.7 12% 12%
Net Debt 509.0 304.7 67%
Adjusted EBITDA² 275.3 221.9 24%
Net Debt : Last 12 months adjusted EBITDA² 1.8x 1.4x
Adjusted earnings per share² 41.3p 37.5p 10%
Ordinary dividend per share 23.6p 21.4p 10%
FY20 Group financial summary
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• 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.
homeserveplc.com
Revenue Adjusted operating profit/ (loss)
£million FY20 FY19 Δ% Δ% CC¹ FY20 FY19 Δ% Δ% CC¹
UK 372.9 391.7 (5)% (5)% 81.0 66.0 23% 23%
North America 429.5 333.4 29% 25% 85.4 67.6 26% 23%
France 111.8 104.6 7% 8% 33.8 33.3 1% 3%
Spain 154.1 140.8 9% 11% 20.1 17.7 13% 16%
New Markets – – – – (4.7) (2.4) 91% 91%
Home Experts 71.8 40.4 78% 78% (13.9) (7.4) 86% 86%
Inter-segment (7.8) (7.3) 6% 6% – – – –
Group 1,132.3 1,003.6 13% 12% 201.7 174.8 15% 15%
1 Constant currency $1.31 : £1, €1.13 : £1
FY20 Divisional financial performance
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• £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
Guidance (May 2020)
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Solid performance expected 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.
Longer term growth prospects and medium to long-term milestone targets 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.
Other
• Ordinary capital expenditure (FY20: £79m) expected to fall slightly in FY21.
homeserveplc.com
UK
FY20 FY19 Change
Affinity partner households m 26 26 —
Customers m 1.8 2.0 -11%
Income per customer £ 140 122 +15%
Policies m 4.9 5.4 -9%
Policies per customer 2.7 2.7 —
Retention rate % 78 79 -1ppt
North America
FY20 FY19 Change
Affinity partner households m 64 60 +6%
Customers m 4.4 4.0 +9%
Income per customer $ 102 96 +6%
Policies m 7.5 6.7 +12%
Policies per customer 1.7 1.7 —
Retention rate % 83 83 —
France
FY20 FY19 Change
Affinity partner households m 18 18 —
Customers m 1.1 1.1 +5%
Income per customer € 108 109 -1%
Policies m 2.4 2.3 +2%
Policies per customer 2.2 2.1 +1%
Retention rate % 89 89 —
Spain
FY20 FY19 Change
Affinity partner households m — — —
Customers m 1.0 1.1 -13%
Income per customer € 61 57 +8%
Policies m 1.1 1.3 -16%
Policies per customer 1.1 1.2 -1%
Retention rate % 83 80 +3ppts
FY20 Membership KPIs
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homeserveplc.com
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%
FY20 Home Experts KPIs
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eLocal
FY20 FY19 Change
Trades k 3 - n/a
homeserveplc.com
FY20 Cash flow performance
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• £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.
304.7
450.8509.0
275.3
9.244.1 12.4
30.2 18.5
79.06.9
148.3 8.4
73.5 11.5 11.8 2.9
58.1
Net Debt 31March 2019
AdjustedEBITDA
Non CashItems
WorkingCapital
Repaymentof leaseprincipal
Tax Net Interest Capex -ordinary
Capex -policy book
M&A
M&A Italy sale Ordinarydividend
Foreignexchan ge
Net debtacquired
Other Leases Net Debt 31March 2020
homeserveplc.com
249.4
372.9
81.0
89.5
21.212.8
Grossrevenue
IPT Underwriting Net policyincome
Repairservices
HVAC Other TotalRevenue
Repairnetwork
costs
APcommisisons
Marketingcosts
Call Centres Overheads Adjustedoperating
profit
* Operating cost types are for illustrative purposes only and are not to scale
‘Gross revenue’ is the sum of total premiums paid by customers......we deduct associated underwriting expenses and sales 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 operating costs, “repair network costs” and immediately recovered from the underwriter as “repair services income”...
...The UK P&L therefore has an element of zero margin revenue. In other businesses (North America, France, Spain) underwriting recovery is 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 marketingand the commissions paid to utility partners for successful sales activity.
£m
Explainer: Our UK home assistance financial business model (FY20)
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Explainer: Working capital
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Customer takes out a HomeServe policy on Jan 1st
which brings net policy income of £120. This revenue is recognised up front on 1st Jan, along with a receivable. A corresponding payable of £36 is recognised, being the fee due to the underwriter. This results in net working capital absorption of £84 on 1st Jan.
From January, monthly cash instalments are received from the customer, with the underwriter receiving payment 60 days after. At the year end a receivable of £90 remains on the balance sheet, with an associated payable of £33, resulting in net working capital absorption of £57 on 31st March.
Cash instalments from the customer continue to flow through on a monthly basis and the receivable is fully collected as at 31st Dec.
• As required by IFRS 15, revenue on Membership home assistance policy sales is recognised up front.
• The seasonality of policy sales remains weighted to the second half, and particularly the final quarter. The continued growth in the Membership business is therefore a big driver of the absorption of working capital on an annualised basis.
• Notwithstanding this, cash from the policy sales fully flows through within the subsequent 12 months – a feature of our highly cash generative model.
Strong growth in MembershipNet policy income (£m)
10% CAGR
homeserveplc.com
Miriam McKay Group Communications and IR [email protected]+44 7795 062564
Dami TanimowoSenior Investor Relations [email protected]+44 7747 761 155
Contacts
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homeserveplc.com
This document 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 upon 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 announcement should be construed as a profit forecast.
Forward looking statements
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