homeserve plc interim results for the six months ended 30 .../media/files/h/home... · new policy...

_____________________________________________________________________________

All references to adjusted operating profit or loss, adjusted profit before tax and adjusted earnings per share throughout the announcement are adjusted figures, as reconciled to their statutory equivalents in the Financial Review on page 14.

1

HomeServe plc Interim results for the six months ended 30 September 2013

Six months ended

September 2013

Six months ended September

2012 Revenue £241.3m £229.6m Adjusted profit before tax £25.6m £25.6m Adjusted earnings per share 5.5p 5.6p Statutory profit before tax £0.6m £19.1m Basic earnings per share 0.1p 4.2p Dividend per share 3.63p 3.63p

• Half year summary - Revenue up 5% to £241.3m

- UK revenue reduced, as expected, by £7.3m to £127.2m - International revenue up £20.5m to £116.8m

- Total customer numbers up 0.3m to 5.1m (HY2013: 4.8m) - Overall policy retention rate up from 80% to 82% - Free cash flow of £23.2m (HY2013: £10.3m) with net debt £40.7m (March 2013:

£42.9m, September 2012: £78.1m) - Statutory profit before tax includes additional exceptional expenditure of £19.0m

(HY2013: nil) to complete the UK customer re-contact exercise

• UK customer acquisition and retention rate increasing - Gross new customers increased to 80k (HY2013: 40k) - Retention rate up to 81% (HY2013: 78%) with higher levels of customer satisfaction - Customer numbers at 31 March 2014 now expected to be around 2.0m - Financial Conduct Authority (FCA) investigation is ongoing

• International customer numbers up 25% to 2.9m

- USA customer numbers up 21% to 1.4m - Spain customer numbers up 104% to 0.6m - Doméo and USA retention rates increased

- Up 2 ppts to 89% in Doméo - Up 1 ppts to 80% in the USA

- Five new affinity partners in the USA so far this year JM Barry Gibson, Chairman, HomeServe plc, commented: “HomeServe has made a positive start to FY2014 and this has given us increased confidence in our ability to deliver our current and medium term plans. We expect UK customer numbers to stabilise from March 2014 and as we continue to develop and grow our International businesses, we expect the Group to return to modest growth in FY2015.”

2

Richard Harpin, Chief Executive HomeServe plc, commented: “Total customer numbers increased to 5.1m from 4.8m over the last year. HomeServe continues to provide attractive products and services which meet our customers’ needs. Our UK business has made good operational progress, our retention rate is improving and we now expect customer numbers to stabilise at a slightly higher level during 2014 than previously anticipated. Our International businesses continue to deliver good growth and our USA pipeline, in particular, is strong. We have made a good start to FY2014, however our peak marketing and renewal period lies ahead of us in the second half of the year and we expect our full year performance to be in line with our previous expectations.”

Enquiries A presentation for analysts and investors will take place at 9am this morning at UBS, 1 Finsbury Avenue, London, EC2M 2PP. There will be a listen-only conference call via +44 203 139 4830, pin code 87792499#, and also a live webcast available via www.homeserveplc.com.

HomeServe plc Tel: 01922 427979 Richard Harpin, Chief Executive Johnathan Ford, Chief Financial Officer Mark Jones, Head of Investor Relations

Tulchan Group Tel: 0207 353 4200 Christian Cowley Martin Robinson

http://www.homeserveplc.com/�

3

INTERIM MANAGEMENT REPORT SUMMARY We have delivered a set of financial results for the first half of FY2014 in line with expectations. Total customer numbers increased from 4.8m to 5.1m with the overall policy retention rate also increasing from 80% to 82%. Our UK business has increased its marketing activity and improved retention to 81% in the first half of the year. Although the peak marketing activity and policy renewal months are in the second half of the year, our performance to date has given us increased confidence in our ability to deliver our medium term plans and we now expect UK customer numbers will stabilise at around 2.0m in March 2014. Our International businesses are continuing to grow with five new affinity partners in the USA, and International customer numbers up 25% to 2.9m. Revenue was up 5% to £241.3m (HY2013: £229.6m) and adjusted profit before tax was £25.6m (HY2013: £25.6m). In the UK customer numbers reduced, as expected, and totalled 2.2m at 30 September, whilst overseas our International businesses continued to grow with customer numbers up 0.6m to 2.9m. Homeowners continue to value and use our policies and services with 0.7m jobs carried out in the first half of the year. UK adjusted operating profit in the first half of the year was £22.0m (HY2013: £26.0m) with our International businesses contributing £4.8m of operating profit, up from £1.1m in the prior period. Over the past two years, we have re-focused the UK business on the customer and made improvements to our service, culture, governance and controls. We continue to have a good constructive relationship with our Supervisory team at the Financial Conduct Authority (FCA). The FCA enforcement team’s investigation into our past issues is continuing. Our statutory results in the period include additional exceptional expenditure of £19.0m to complete the UK customer re-contact exercise and finish addressing the legacy issues. We are committed to delivering fair outcomes for all our customers and expect to complete the re-contact exercise by March 2014. The population of customers to be re-contacted remains unchanged but we now have greater visibility of the expected total cost of the exercise, which we anticipate will be higher than originally expected. The exceptional charge reflects our updated assumptions and further details on the customer re-contact exercise can be found later in this section. Our balance sheet remains strong and the business continues to be cash generative. Net debt was £40.7m at 30 September 2013, lower than the £78.1m reported at 30 September 2012 and the £42.9m reported at 31 March 2013. The Board is proposing an unchanged interim dividend of 3.63p per share (HY2013: 3.63p). The table below shows our performance metrics on a global basis as at 30 September 2013.

HY 2014

HY 2013

Total households m 222 222 Affinity partner households m 76 72 Customers m 5.1 4.8 Income per customer £ 82 89 Policies m 10.4 10.6 Policy retention rate % 82 80 Adjusted operating profit £m 26.8 27.1

4

The Group has five operating segments UK, USA, Doméo, Spain and New Markets. The New Markets division combines the results of our businesses in Italy, Germany and SFG in France. The following section reports on the performance of each of our business segments. INDIVIDUAL BUSINESS PERFORMANCE United Kingdom

Gross new customers increased to 80k and policy retention up to 81% Customer numbers now expected to be around 2.0m in March 2014 Increased customer satisfaction with complaint numbers reduced by 47%

UK performance metrics Sept

2013 Sept 2012

Change

Total households in UK m 26 26 - Affinity partner households m 24 24 - Customers m 2.2 2.5 -13% Income per customer £ 106 105 +1% Policy retention rate % 81 78 +3ppts

UK policies split by type Sept

2013 Sept 2012

Water m 3.0 3.4 Electrical m 0.5 0.6 Heating, ventilation, air conditioning (HVAC) m 0.6 0.7 Manufacturer warranties m 0.4 0.5 Other m 0.7 0.8 Total policies m 5.2 6.0 In the UK, revenue reduced by £7.3m to £127.2m (HY2013: £134.5m) reflecting the reduction in customer numbers. Adjusted operating profit was £22.0m (HY2013: £26.0m) with the reduction in revenue being partially offset by lower costs. The lower costs are a result of a reduced headcount, partially offset by increased marketing and repair network costs. Our customers continue to use our services with over 0.25m jobs completed in the UK during the first half of the year. 60% of these jobs were completed by our directly employed network of plumbers. Over the past six months we have increased customer acquisition activity and improved the policy retention rate in the UK. Whilst our peak marketing and renewal months are in the second half of the year, our performance in the first six months has given us increased confidence and we now expect customer numbers in March 2014 to be around 2.0m. We have increased our direct marketing activity in the first half of the year with take-up rates in line with our expectations, as well as increasing sales through partners’ and digital channels. Our digital channel is performing well with sales in the first half of the year more than double a year ago. We continue to improve customer service and satisfaction with the roll-out of our enhanced plumbing and drainage policy as well as strengthening our directly employed and sub-contractor engineer networks. The number of complaints received in the first half of FY2014 was 47% lower than a year ago. The improvements in customer service, as well as the tenure of customers, have contributed to the policy retention rate increasing to 81% in the first half of the year. Customer numbers at 30 September 2013 were 2.2m (FY2013: 2.3m, HY2013: 2.5m). Gross new customers in the first half of the year were 80k, up from 40k in the same period in FY2013. Gross

5

new policy sales in the first half of the financial year increased to 0.2m (HY2013: 0.1m) and at the end of September 2013 total policy numbers were 5.2m (HY2013: 6.0m). Income per customer was £106, up £1 compared to the prior period (HY2013: £105) reflecting the mix and price of policies as well as the tenure of customers. Income per customer in the second half of the year is expected to reduce as we increase the proportion of new customers (who typically pay a lower price in the first year) and roll-out our enhanced plumbing and drainage policy. This enhanced policy provides customers with broader, non-emergency cover and as a result we have seen an initial increase in claims that will contribute to a lower income per customer in the second half of FY2014 and FY2015 as we complete the roll-out to all customers. Our affinity partners remain very supportive of our plans and are working closely with us to help grow new customer acquisition volumes in future years. We continue to make good progress in renewing our long term affinity partnership agreements as they become due for renewal. Over the past six months we have made a number of improvements to our digital offering including launching our products on a number of aggregator web sites including moneysupermarket.com and Uswitch, introducing independent customer reviews on our policies and services on our HomeServe.com website as well as increasing our search optimisation activity and piloting a web chat service. The majority of new customers buying their policies through our digital channels have taken our HomeServe Cover 8 product, which provides cover for eight separate types of emergency. During the second half of the year, we will continue to increase the number of partners’ call centres who are transferring sales calls, continue to develop our digital offering and re-start the sale of Complete Cover policies via direct mail for the first time since November 2011. These plans, together with the performance of our direct mail activity in the first half of the year, give us confidence of achieving our FY2014 gross new customer acquisition target of 0.2m. As announced in October 2013, Jonathan King, Chief Executive Officer HomeServe Membership, has decided to step down from the business to pursue a Non-Executive career. Martin Bennett, currently Group Chief Operating Officer, will be appointed Chief Executive Officer, HomeServe Membership from 1 January 2014. United States of America

Customer numbers up 21% to 1.4m Five new affinity partnerships so far in 2014 Increased our affinity partner households by 1.6m to 22m over the past 12 months

USA performance metrics Sept

2013 Sept 2012

Change

Total households in USA m 128 128 - Affinity partner households m 22 21 + 8% Customers m 1.4 1.2 +21% Income per customer $ 109 114 -4% Policy retention rate % 80 79 +1ppts

6

USA policies split by type Sept 2013

Sept 2012

Water m 1.1 0.9 Electrical m 0.2 0.2 Heating, Ventilation, Air Conditioning (HVAC) m 0.6 0.5 Other m 0.3 0.3 Total policies m 2.2 1.9 Revenue in the USA was £45.8m (HY2013: £39.3m), 16% higher than a year ago, principally due to the strong growth in customer and policy numbers over the past 12 months. The adjusted operating loss of £0.1m (HY2013: loss of £2.0m) reflects the usual seasonality of the business. We continue to expect strong growth in full year operating profit with customer numbers increasing at a slower rate than in FY2013. In the first half of the year we acquired 0.2m new customers, in line with the number acquired in the same period last year (HY2013: 0.2m). This growth has been achieved through marketing campaigns with both new and existing affinity partners as well as our ‘own brand’ activity. The retention rate in the first half of the year was 80% (HY2013: 79%). Total customer numbers increased by 21% to 1.4m (HY2013: 1.2m) with policy numbers increasing to 2.2m (HY2013: 1.9m). Income per customer was $109, $5 lower than a year ago reflecting an increasing proportion of water and electric related policies, which have a lower net income than Heating Ventilation Air Conditioning (HVAC) policies. HVAC policies have, over the past few years, been the principal driver of the growth in net income per customer. We have continued to make progress in increasing our affinity partner households in the USA. During the first half of FY2014, we announced the signing of four new affinity partnerships representing 0.3m households and have since then signed another partner which serves 0.1m households. Our pipeline of potential partnerships continues to remain strong with potential agreements at all stages of the process. Direct mail continues to be our primary sales channel in the USA although we are increasing the number of partners’ call centres which are selling our policies or passing leads through to our own call centre agents. Our digital channel in the USA is also growing in importance. We continue to fix our customers’ emergencies through our 132 directly employed technicians in the New York and Massachusetts territories and our national network of 660 high quality sub-contractors. In the first half of FY2014 we completed 23% more repair jobs than in the same period last year. Doméo

Adjusted operating profit of £5.8m, up £0.2m Retention remains the highest of all our businesses at 89%

Doméo performance metrics Sept

2013 Sept 2012

Change

Total households in France m 27 27 - Affinity partner households (excluding apartments) m 14 14 - Customers m 0.9 0.9 +2% Income per customer € 99 100 -1% Policy retention rate % 89 87 +2ppts

7

Doméo policies split by type Sept

2013 Sept 2012

Water m 1.9 1.9 Electrical m 0.2 0.2 Other m 0.2 0.2 Total policies m 2.3 2.3 Doméo revenue was £28.9m (HY2013: £26.6m), with the increase reflecting the mix and price of policies as well as the benefit of a stronger Euro. Adjusted operating profit was £5.8m (HY2013: £5.6m), with the increase in revenue partially offset by increased marketing costs. Customer numbers at 30 September 2013 were 0.9m (HY2013: 0.9m). We continue to develop and test new direct marketing material as well as increasing the volume of sales calls being transferred from our affinity partner’s call centres to our own sales teams. Our good financial results and high operating margin in France are driven by our highest retention rate, which in the first half of the year was 89% (HY2013: 87%). A key priority of the management team in Doméo is to sign-up additional affinity partners to complement Veolia. Our business development team is actively talking to a number of public and private utilities and is planning some test marketing activity in the coming months. Spain

Customers up 104% and policy numbers up 97% Over 70% of new customers acquired through our affinity partner Endesa’s sales

channels

Spain performance metrics Sept 2013

Sept 2012

Change

Total households in Spain m 17 17 - Affinity partner households m 13 13 - Customers m 0.6 0.3 +104% As the Spanish policy book is growing quickly we do not currently report the retention rate and income per customer metrics Spain policies split by type Sept

2013 Sept 2012

Water m 0.1 0.1 Electrical m 0.5 0.2 Other m 0.1 0.1 Total policies m 0.7 0.4

In Spain, Reparalia reported an adjusted operating profit of £1.0m (HY2013: loss £0.1m) reflecting growth in both membership and claims handling revenue, partially offset by increased marketing activity and affinity partner commissions. We continue to achieve strong growth, with customer numbers increasing to 0.6m (HY2013: 0.3m) and policy numbers up 97% to 0.7m (HY2013: 0.4m). The key driver of customer and policy growth has been sales of our electrical assistance policy. In the first half of the year we acquired 0.3m gross new customers (HY2013: 0.1m), over 70% of which were acquired through our affinity partner, Endesa. Endesa is Spain’s largest electric

8

utility serving over 10m households and is selling our policies through its sales channels. These channels include telephony and sales centres with the majority of the sales made to existing Endesa customers who have been switching from a regulated to a non-regulated electricity tariff. Our claims handling business in Spain continues to perform well with growth in the number of insurance company customers and the volume of claims managed. In Spain, our network of 1,500 sub-contract and Reparalia franchised engineers has completed 0.2m repairs (for both the Claims and membership businesses) over the past six months, a 29% increase compared to the same period last year. New Markets

Enel has started to sell our policies through its sales channels in Italy Continued test activity in Germany

Our New Markets segment includes our developing businesses in Italy and Germany and SFG in France. These businesses reported revenue of £5.9m (HY2013: £4.6m) and an adjusted operating loss of £1.9m (HY2013: £2.4m). The reduced operating loss principally reflects increased revenue from our Italian business as we start to grow customer numbers and renew policies. In Italy we are continuing to develop our relationship with Enel and have seen good initial results from selling our policies through its sales channels. In addition to our partnerships with Enel and Veritas, we are continuing test marketing activity and potential partnership discussions with a number of other utilities. In Germany we are discussing potential affinity partnerships with a number of utilities as well as continuing to invest in test activity. UK CUSTOMER RE-CONTACT EXERCISE We have now completed the re-contact of customers whose complaints may not have been handled correctly during winter 2010. We expect to have re-contacted all the customers who may have suffered detriment as a result of the way in which they bought their policy by the end of March 2014. We are fully committed to ensuring fair outcomes for all our customers and addressing any detriment incurred. The population of customers, dating back to 2005, being re-contacted remains unchanged and we continue to believe that only a small proportion of these customers need to be reimbursed. As a result of the customers who we have already re-contacted, we have greater visibility of the number requesting a review and the value of reimbursements being made. This forecast is higher than our original estimate and we have therefore reflected this in these financial results, with an additional exceptional expenditure charge of £19.0m. INVESTMENT IN GROWTH AND OPERATIONAL EFFICIENCY In the first half of the year we have continued to implement our group wide Oracle financial management system and have also been planning the design and implementation of our new packaged customer IT system which will be implemented over the next 3 years (FY2014-2016). The new customer IT system will enable us, in the USA, to on-board affinity partners and integrate our charging processes into their billing systems more quickly whilst in the UK it will improve our marketing effectiveness, reduce our costs and improve our compliance and control processes. Across the Group, the system will provide call centre agents in all parts of the business with a single view of the customer. Our total capital expenditure during FY2014 is expected to be around £35m, with the expenditure on the new customer IT system slightly lower this year than originally planned as we

9

complete more of the planning phase using internal resource. Capital expenditure also includes payments made to affinity partners for the long term provision of exclusive database access, branding rights as well as payments relating to the acquisition of customer relationships generated by our affinity partner in Spain. BOARD CHANGES As announced on 23 October 2013, Jonathan King, Chief Executive Officer of HomeServe Membership Limited (our UK business) and an Executive Director of HomeServe plc, has decided to step down from the business after 13 years of service to pursue a Non-Executive career. Jonathan will leave the HomeServe Membership Limited Board on 31 December 2013 and the HomeServe plc Board on 31 March 2014. Martin Bennett will be appointed Chief Executive Officer of HomeServe Membership Limited from 1 January 2014. Martin has been a member of the HomeServe plc Board since 2009 and was appointed as Group Chief Operating Officer in January 2012 following three years as Chief Financial Officer, and has previously held a number of roles across the Group’s UK Membership business. Martin’s existing responsibilities for Risk Management, Information Systems and Underwriting will transfer to Johnathan Ford, Group Chief Financial Officer, on 1 January 2014. OUTLOOK The Group's performance in FY2014 will reflect the impact of the reduction in UK customer numbers. As UK customer numbers stabilise from March 2014 and we continue to develop and grow our International businesses, we expect the Group to return to modest growth in FY2015.

In the UK we remain focused on increasing new customer acquisition and retention as well as stabilising customer numbers. We now expect to stabilise customer numbers at around 2.0m from March 2014. In our International businesses we are planning for continued growth in affinity partners, customers and profit. Our results for the first six months of FY2014 give us increased confidence in our ability to deliver our medium term plans. We expect our FY2014 results, excluding exceptional expenditure, for the full year to be in line with our previous expectations.

10

FINANCIAL REVIEW Segmental Results The revenue and adjusted operating profit for each of our segments are set out in the table below. £million Revenue Adjusted operating profit /

(loss) Adjusted operating margin

Six months ended September Six months ended September Six months ended September 2013 2012 2013 2012 2013 2012 UK 127.2 134.5 22.0 26.0 17.3% 19.4% USA 45.8 39.3 (0.1) (2.0) - - Doméo 28.9 26.6 5.8 5.6 19.9% 20.9% Spain 36.2 25.8 1.0 (0.1) 2.8% - New Markets 5.9 4.6 (1.9) (2.4) - - Inter-division (2.7) (1.2) - - - - Group 241.3 229.6 26.8 27.1 11.1% 11.8% Group revenue increased by 5% to £241.3m (HY2013: £229.6m), with a reduction in UK revenues more than offset by higher revenues in our International businesses. Adjusted operating profit was £26.8m, £0.3m lower than in HY2013. The growth in operating profits from our International businesses broadly offset the reduction in profit in our UK business. The Group adjusted operating margin (adjusted operating profit/(loss) divided by revenue) was 11.1% (HY2013: 11.8%), with lower margins in the UK and Doméo being partially offset by higher earnings in our USA and Spanish businesses.

UK

£million Six months ended September 2013

Six months ended September 2012

Change

Revenue Net income 90.5 100.7 (10.2) Repair network 30.7 27.9 2.8 Other 6.0 5.9 0.1

Total revenue 127.2 134.5 (7.3) Operating costs (105.2) (108.5) 3.3 Adjusted operating profit 22.0 26.0 (4.0)

Our UK business reported revenue of £127.2m (HY2013: £134.5m) which can be analysed as net income of £90.5m (HY2013: £100.7m), with the remaining income of £36.7m (HY2013: £33.8m), representing £30.7m of repair network revenue (HY2013: £27.9m) and other income of £6.0m (HY2013: £5.9m). Revenue in the first half of the year reduced as a result of the reduction in customer numbers. UK operating costs reduced by £3.3m in the first half of the year as a result of lower staff numbers, partially offset by increased marketing expenditure and a higher cost of repairs. Adjusted operating profit was £22.0m, £4.0m lower than prior period (HY2013: £26.0m). In the second half of the year, we will continue to increase our marketing activity and this, together with lower revenue as a result of the expected reduction in customer numbers, will be reflected in the results for the UK for the year as a whole.

11

USA

Revenue in the USA increased by 16% to £45.8m (HY2013: £39.3m) driven by the 21% increase in customer numbers. In the first half of the year our directly employed engineers in the USA focus principally on Heating Ventilation and Air Conditioning (HVAC) tune-ups, which have lower revenue and margin than our underwritten emergency HVAC repairs. We have also continued to invest in our business development, digital and IT teams in the first half of FY2014. These actions, combined with over two-thirds of the policy renewals in the USA being due in the second half of the year, have resulted in a first half operating loss of £0.1m (HY2013: £2.0m). We continue to expect strong year on year growth from our American business.

Doméo

Doméo’s revenue increased by 8.5% to £28.9m (HY2013: £26.6m) reflecting the mix and price of policies and the benefit of a stronger Euro. Adjusted operating profit was £5.8m, a 3% increase compared to the prior period (HY2013: £5.6m). The growth in profit was driven by higher revenue, partially offset by increased marketing costs.

Spain

£million Six months ended September 2013


Change

Revenue Membership 6.8 3.7 3.1 Claims handling 29.4 22.1 7.3

Total revenue 36.2 25.8 10.4 Adjusted operating profit/(loss) 1.0 (0.1) 1.1 In Spain, Reparalia’s revenue increased by £10.4m to £36.2m (HY2013: £25.8m) with the growth in customer and policy numbers resulting in membership revenue increasing by 81% to £6.8m (HY2013: £3.7m). Claims handling revenue was up £7.3m to £29.4m reflecting an increase in the number of claims handled for both existing and new customers. Adjusted operating profit was £1.0m, compared to an operating loss of £0.1m a year ago. The increase reflects the higher volume of business in Claims and the growth in Membership customer numbers, partially offset by increased marketing and higher affinity partner commissions.

New Markets

In our New Markets’ business, revenue was £5.9m (HY2013: £4.6m). The increased revenue was principally a result of income in Italy increasing to £0.9m, up from £0.2m a year ago. Our New Markets segment operating loss was £1.9m compared to £2.4m in HY2013. The operating loss principally reflects the investment in business development and marketing activity in Italy and Germany.

12

Cash flow and financing Our business model continues to be cash generative. Cash generated by operations in the first six months of FY2014 amounted to £52.4m (HY2013: £42.7m). £million Six months ended

September 2013 Six months ended

September 2012 Adjusted operating profit 26.8 27.1 Amortisation of acquisition intangibles and exceptional item (25.0) (6.5) Operating profit 1.8 20.6 Depreciation, amortisation and other non-cash items 15.9 14.7 Decrease in working capital 34.7 7.4 Cash generated by operations 52.4 42.7 Net interest (1.1) (1.2) Taxation (12.8) (11.8) Capital expenditure (15.0) (19.1) Repayment of finance leases (0.3) (0.3) Free cash flow 23.2 10.3 Acquisitions / disposals (0.2) (0.8) Equity dividends paid (24.9) (24.8) Issue of shares 0.9 0.5 Net movement in cash and bank borrowings (1.0) (14.8) Impact of foreign exchange 2.9 3.6 Finance leases 0.3 (0.9) Opening net debt (42.9) (66.0) Closing net debt (40.7) (78.1) The reduction in working capital of £34.7m principally reflects the £19.0m exceptional expenditure and lower number of UK customers, partially offset by the growth in our International businesses and £9.3m of payments related to addressing the UK issues and reorganisation costs. During the first six months of the financial year, we incurred capital expenditure of £15.0m (HY2013: £19.1m). Capital expenditure included commencing the project to implement a new packaged IT system, as well as further work on the implementation of a group-wide financial management system. Capital expenditure also included payments made to affinity partners for the long term provision of exclusive database access, branding rights and payments relating to the acquisition of customer relationships generated by affinity partners. Free cashflow in the first half of the year was £23.2m. This is higher than the £10.3m achieved in HY2013 due to the working capital decrease and slightly lower capital expenditure, as noted above. At 31 March 2013, we had a balance sheet provision of £20.1m in respect of expenditure relating to addressing the issues in the UK identified in November 2011; our best estimate of the anticipated costs of managing the FCA investigation and a fine; and the plans announced in March 2013 to reduce the number of roles in the UK business. During the past six months, we have used £9.3m of these provisions as we continued our re-contact exercise and implemented the reduction in the UK headcount. We have added a further £19.0m to the provision during the period as a result of updating our assumptions for the re-contact exercise (as detailed earlier in the statement). At 30 September 2013 our balance sheet provision was £29.8m.

13

Net debt at 30 September 2013 was £40.7m (HY2013: £78.1m), a reduction of £37.4m over the 12 month period, principally due to the high levels of cash being generated by the business. Net debt at 30 September was £2.2m lower than the £42.9m at 31 March 2013. Group statutory results The headline statutory financial results for the Group are presented below. £million



Total revenue

241.3 229.6

Operating profit 1.8 20.6 Net finance costs

(1.2) (1.5)

Adjusted profit before tax 25.6 25.6 Amortisation of acquisition intangibles (6.0) (6.5) Exceptional expenditure (19.0) - Statutory profit before tax 0.6 19.1 Tax (0.2) (5.4)

Profit for the period, being attributable to equity holders of the parent 0.4 13.7 Statutory operating profit, after the amortisation of acquisition intangibles and exceptional expenditure was £1.8m (HY2013: £20.6m). The amortisation of acquisition intangibles of £6.0m (HY2013: £6.5m) principally relates to customer and other contracts held by the acquired entities at the date of acquisition. Statutory profit before tax was £0.6m (HY2013: £19.1m). The exceptional expenditure of £19.0m relates to the additional expected cost of completing, by March 2014, the UK customer re-contact exercise. As a result of the customers who we have already re-contacted, we have greater visibility of the number requesting a review and the value of reimbursements being made. This forecast is higher than our original estimate and we have therefore reflected our updated assumptions in the above charge. The assumptions used relating to the number of reviews, value of reimbursement and the upheld rate require the use of judgement and estimation and therefore the actual cost could be different to that provided here. There remains uncertainty as to the nature or extent of the action that the FCA may seek to take following the conclusion of its investigation and accordingly any related financial effect. The £6.0m charge recorded at 31 March 2013 remains our best estimate of the anticipated costs of managing the FCA investigation and a fine. Finance costs The Group’s net finance costs in the first six months of the financial year were £1.2m (HY2013: £1.5m), £0.3m lower than in the same period last year reflecting a lower average level of debt. Taxation The tax charge in the first half of the financial year was £0.2m (HY2013: £5.4m). The effective tax rate was 29.9% compared to 28.5% in HY2013 and represents the estimated tax rate for the full year. The effective tax rate in the first half of the year excluding the exceptional expenditure was 28.1%. We continue to expect this rate to gradually increase in future years as our overseas businesses, which are based in countries which have higher tax rates than the UK, contribute an increasing proportion of our earnings.

14

Earnings per share Adjusted earnings per share for the period was 5.5p (HY2013: 5.6p). The reduction in adjusted earnings per share is principally a result of an increase in the average number of shares in issue from 324m to 325m. On a statutory basis, earnings per share was 0.1p (HY2013: 4.2p). Dividend The interim dividend of 3.63p per share (HY2013: 3.63p) will be paid on 3 January 2014 to shareholders on the register on 6 December 2013. Foreign exchange impact The impact of changes in the € and $ exchange rates for the relevant periods has resulted in the reported revenue increasing by £5.2m and adjusted operating profit of our International businesses increasing by £0.5m respectively. The impact of the foreign exchange rate movements on the individual businesses is summarised in the table below.

Average exchange rate Effect on (£m) HY14 HY13 Change Revenue Adjusted

Operating Profit USA ($) 1.54 1.58 -0.04 1.2 0.1 Doméo (€) 1.17 1.25 -0.08 1.6 0.4 Spain (€) 1.17 1.25 -0.08 2.1 0.1 New Markets (€) 1.17 1.25 -0.08 0.3 (0.1) Total 5.2 0.5

Statutory and pro-forma reconciliations The Group continues to believe that adjusted operating profit and adjusted profit before tax, which exclude the amortisation of acquisition intangibles and exceptional items, are important performance indicators for monitoring the business. This report uses a number of pro-forma measures to highlight the Group’s results excluding the above amounts. The following tables provide a reconciliation between the statutory and pro-forma items. £million



Operating profit (statutory) 1.8 20.6 Amortisation of acquisition intangibles 6.0 6.5 Exceptional expenditure 19.0 - Adjusted operating profit 26.8 27.1

£million Profit before tax (statutory) 0.6 19.1 Amortisation of acquisition intangibles 6.0 6.5 Exceptional expenditure 19.0 - Adjusted profit before tax 25.6 25.6 Pence per share

Earnings per share (statutory) 0.1 4.2 Amortisation of acquisition intangibles 1.1 1.4 Exceptional expenditure 4.3 - Adjusted earnings per share 5.5 5.6

15

Principal risks and uncertainties The principal risks and uncertainties, together with the mitigating activities, detailed on pages 30 - 35 of the Group's 2013 Annual Report and Financial Statements, continue to have the potential to impact the Group's performance and are as follows:

• Ability to implement an updated strategy successfully within the UK business • The potential loss of a commercial relationship • The impact of competition • A change in customer loyalty and retention • Our marketing effectiveness • Exposure to legislation or regulatory requirements • Financial cost of customer re-contact exercises • Availability of underwriters • The quality of customer service • Recruitment and retention of skilled personnel • Exposure to country and regional risks • Our IT systems become a constraint to growth and drive inefficiency instead of efficiency

improvements • Financial and treasury risks including credit risk.

Information on financial risk management is also set out on pages 123-125 of the Annual Report, a copy of which is available on the Group's website www.HomeServeplc.com.

http://www.homeserveplc.com/�

16

CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

Note

Six months ended 30 September 2013

£m (Unaudited)


£m (Unaudited)

Year ended 31 March 2013

£m (Audited)

Continuing operations Revenue 3 241.3 229.6 546.5 Operating costs (239.5) (209.0) (477.4) Operating profit 1.8 20.6 69.1 Investment income - 0.1 0.1 Finance costs (1.2) (1.6) (2.7) Profit before tax, amortisation of acquisition intangibles and exceptional expenditure 25.6 25.6 105.0 Amortisation of acquisition intangibles (6.0) (6.5) (13.4) Exceptional expenditure 4 (19.0) - (25.1) Profit before tax 0.6 19.1 66.5 Tax 5 (0.2) (5.4) (24.6) Profit for the period, being attributable to equity holders of the parent 0.4 13.7 41.9 Dividends per share 6 3.63p 3.63p 11.3p Earnings per share

Basic 7 0.1p 4.2p 12.9p Diluted 7 0.1p 4.2p 12.7p

17

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013 Six months ended

30 September 2013 £m

(Unaudited)


£m (Unaudited)


£m (Audited)

Profit for the period 0.4 13.7 41.9 Items that will not be classified subsequently to profit and loss: Actuarial loss on defined benefit pension scheme (0.7) (1.2) (0.7) Tax relating to items not reclassified 0.1 0.1 (0.1) (0.6) (1.1) (0.8) Items that may be reclassified subsequently to profit and loss: Exchange movements on translation of foreign entities (1.0) (4.4) 0.6 (1.0) (4.4) 0.6 Other comprehensive loss for the period net of tax (1.6) (5.5) (0.2) Total comprehensive (expense)/income for the period (1.2) 8.2 41.7

18

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

Share Capital

£m

Share Premium Account

£m

Merger Reserve

£m

Own Shares

Reserve £m

Share Incentive

Reserve £m

Capital Redemption

Reserve £m

Currency Translation

reserve £m

Retained Earnings

£m

Total Equity

£m Balance at 1 April 2013 8.2 38.3 71.0 (17.7) 11.1 1.2 4.5 258.6 375.2 Total comprehensive expense - - - - - - (1.0) (0.2) (1.2) Dividends paid - - - - - - - (24.9) (24.9) Issue of share capital - 0.1 - - - - - - 0.1 Issue of trust shares - - - 1.0 - - - (0.2) 0.8 Share-based payments - - - - 2.0 - - - 2.0 Share options exercised - - - - (0.1) - - 0.1 - Deferred tax on share options - - - - - - - 0.4 0.4 Balance at 30 September 2013 (Unaudited) 8.2 38.4 71.0 (16.7) 13.0 1.2 3.5 233.8 352.4

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012

Share Capital

£m


£m

Merger Reserve

£m

Own Shares

Reserve £m

Share Incentive

Reserve £m

Capital Redemption

Reserve £m


reserve £m

Retained Earnings

£m

Total Equity

£m Balance at 1 April 2012 8.2 38.1 71.0 (19.1) 8.6 1.2 3.9 254.5 366.4 Total comprehensive income - - - - - - (4.4) 12.6 8.2 Dividends paid - - - - - - - (24.8) (24.8) Issue of share capital - 0.1 - - - - - - 0.1 Issue of trust shares - - - 1.4 - - - (1.0) 0.4 Share-based payments - - - - 1.5 - - - 1.5 Share options exercised - - - - (0.5) - - 0.5 - Deferred tax on share options - - - - - - - 0.1 0.1 Balance at 30 September 2012 (Unaudited) 8.2 38.2 71.0 (17.7) 9.6 1.2 (0.5) 241.9 351.9 FOR THE YEAR ENDED 31 MARCH 2013

Share Capital

£m


£m

Merger Reserve

£m

Own Shares

Reserve £m

Share Incentive

Reserve £m

Capital Redemption

Reserve £m


reserve £m

Retained Earnings

£m

Total Equity

£m Balance at 1 April 2012 8.2 38.1 71.0 (19.1) 8.6 1.2 3.9 254.5 366.4 Total comprehensive income - - - - - - 0.6 41.1 41.7 Dividends paid - - - - - - - (36.6) (36.6) Issue of share capital - 0.2 - - - - - - 0.2 Issue of trust shares - - - 1.4 - - - (1.0) 0.4 Share-based payments - - - - 3.0 - - - 3.0 Share options exercised - - - - (0.5) - - 0.5 - Tax on exercised share options - - - - - - - 0.1 0.1 Balance at 31 March 2013 (Audited) 8.2 38.3 71.0 (17.7) 11.1 1.2 4.5 258.6 375.2

19

CONDENSED CONSOLIDATED BALANCE SHEET 30 SEPTEMBER 2013

Note

30 September 2013

£m (Unaudited)

30 September 2012

£m (Unaudited)

31 March 2013

£m (Audited)

Non-current assets Goodwill 247.4 256.7 248.4 Other intangible assets 149.7 142.7 148.8 Property, plant and equipment 31.3 38.3 33.3 Deferred tax assets 4.9 3.3 3.1 433.3 441.0 433.6 Current assets Inventories 1.0 1.3 1.1 Trade and other receivables 253.5 244.2 293.5 Current tax assets 0.3 - - Cash and cash equivalents 8 94.4 52.9 88.6 349.2 298.4 383.2 Total assets 782.5 739.4 816.8 Current liabilities Trade and other payables (229.7) (199.5) (243.8) Current tax liabilities - (2.6) (9.7) Provisions 9 (29.8) (14.7) (20.1) Obligation under finance leases 8 (0.2) (0.5) (0.5) (259.7) (217.3) (274.1) Net current assets 89.5 81.1 109.1 Non-current liabilities Bank and other loans 8 (133.6) (129.0) (129.6) Other financial liabilities (11.7) (13.0) (11.7) Retirement benefit obligation (0.3) (1.1) - Deferred tax liabilities (23.5) (25.6) (24.8) Obligations under finance leases 8 (1.3) (1.5) (1.4) (170.4) (170.2) (167.5) Total liabilities (430.1) (387.5) (441.6) Net assets 352.4 351.9 375.2 Equity Share capital 10 8.2 8.2 8.2 Share premium account 38.4 38.2 38.3 Merger reserve 71.0 71.0 71.0 Own shares reserve (16.7) (17.7) (17.7) Share incentive reserve 13.0 9.6 11.1 Capital redemption reserve 1.2 1.2 1.2 Currency translation reserve 3.5 (0.5) 4.5 Retained earnings 233.8 241.9 258.6 Total equity 352.4 351.9 375.2

20

CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

Six months ended

30 September 2013 £m

(Unaudited)


£m (Unaudited)


£m (Audited)

Operating profit 1.8 20.6 69.1 Adjustments for: Depreciation of property, plant and equipment 2.5 3.1 7.8 Amortisation of acquisition intangibles 6.0 6.5 13.4 Amortisation of other intangible assets 5.1 3.6 11.7 Impairment - - 14.8 Share-based payments expenses 2.0 1.5 3.0 Loss on disposal of property, plant and equipment and software 0.3 - 0.6 Operating cash flows before movements in working capital 17.7 35.3 120.4 Decrease in inventories - 0.2 0.4 Decrease in receivables 36.2 42.0 0.4 (Decrease)/Increase in payables (1.5) (34.8) 7.0 Net movement in working capital 34.7 7.4 7.8 Cash generated by operations 52.4 42.7 128.2 Incomes taxes paid (12.8) (11.8) (26.3) Interest paid (1.1) (1.4) (2.7) Net cash from operating activities 38.5 29.5 99.2 Investing activities Interest received - 0.2 0.3 Proceeds on disposal of property, plant and equipment - 0.2 1.4 Purchases of intangible assets (13.7) (12.3) (27.3) Purchases of property, plant and equipment (1.3) (7.0) (4.0) Net cash outflow on acquisitions (0.2) (0.8) (5.8) Net cash used in investing activities (15.2) (19.7) (35.4) Financing activities Dividends paid (24.9) (24.8) (36.6) Repayment of finance leases (0.3) (0.3) (0.6) Issue of shares from the employee benefit trust 0.8 0.4 0.4 Proceeds on issue of share capital 0.1 0.1 0.2 Increase in bank overdrafts and loans 7.1 15.5 8.5 Net cash used in financing activities (17.2) (9.1) (28.1) Net increase in cash and cash equivalents 6.1 0.7 35.7 Cash and cash equivalents at beginning of period 88.6 52.8 52.8 Effect of foreign exchange rate changes (0.3) (0.6) 0.1 Cash and cash equivalents at end of period 94.4 52.9 88.6

21

NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013 1. GENERAL INFORMATION HomeServe plc is a company incorporated in the United Kingdom and its shares are listed on the London Stock Exchange. The address of the registered office is Cable Drive, Walsall, WS2 7BN. The information for the year ended 31 March 2013 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts, the report was not qualified, did not draw attention to any matters by way of emphasis and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006. The condensed set of financial statements for the six months ended 30 September 2013 are unaudited, but have been reviewed by the auditors and their report to the Company is set out on page 28. This condensed set of financial statements was approved by the Board of Directors on 19 November 2013. 2. ACCOUNTING POLICIES Basis of preparation The condensed set of financial statements has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs) and in accordance with International Accounting Standards (IAS)34 “Interim Financial Reporting” as adopted by The European Union. The Group’s annual financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union and therefore comply with Article 4 of the EU IAS regulation. After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements. Changes in accounting policy The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group’s latest audited financial statements, except for the adoption of the following International Accounting Standards: Amendments to IFRS1

Government Loans

Amendments to IFRS7 Disclosures – Transfers of Financial Assets and Financial Liabilities IFRS10 Consolidated Financial Statements IFRS11 Joint Arrangements IFRS12 Disclosure of Interests in Other Entities IFRS13 Fair Value Measurement Amendments to IAS1 Presentation of Other Items of Comprehensive Income Amendments to IAS12 Deferred Tax: Recovery of Underlying Assets IAS19 (revised) Employee Benefits IAS27 (revised) Separate Financial Statements IAS28 (revised) Investments in Associates and Joint Ventures Improvements to IFRSs (2012)

22

IAS1 (amended) has impacted the presentation of the Statement of Comprehensive Income, separating those items that cannot be subsequently classified to the profit and loss from those that may be subsequently classified. IFRS13 has introduced certain additional disclosure requirements and these are set out in Note 13. All other accounting standards listed above have been adopted but their adoption has not had any material impact on the amounts reported in this condensed set of financial statements. 3. BUSINESS AND GEOGRAPHICAL SEGMENTS Business segments IFRS8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker, who is considered to be the Chief Executive, to allocate resources to the segments and to assess their performance. Performance is reviewed individually for all established businesses, and all other new operations are reviewed collectively as ‘New Markets’. There has been no change in the basis of segmentation or in the basis of measurement of segment profit or loss in the period. The sale and renewal of policies across our business are more heavily weighted towards the second half of our financial year. FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013 (UNAUDITED) £million UK USA Doméo Spain

New Markets Total

Revenue Total revenue 127.2 45.8 28.9 36.2 5.9 244.0 Inter-segment (2.7) - - - - (2.7) External revenue 124.5 45.8 28.9 36.2 5.9 241.3 Result Segment operating profit/(loss) pre amortisation of acquisition intangibles and exceptional expenditure 22.0 (0.1) 5.8 1.0 (1.9) 26.8 Amortisation of acquisition intangibles (0.2) (2.4) (3.1) (0.3) - (6.0) Exceptional expenditure (19.0) - - - - (19.0) Operating profit/(loss) 2.8 (2.5) 2.7 0.7 (1.9) 1.8 Investment income - Finance costs (1.2) Profit before tax 0.6 Tax (0.2) Profit for the period 0.4 FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012 (UNAUDITED) £million UK USA Doméo Spain

New Markets Total

Revenue Total revenue 134.5 39.3 26.6 25.8 4.6 230.8 Inter-segment (1.2) - - - - (1.2) External revenue 133.3 39.3 26.6 25.8 4.6 229.6 Result Segment operating profit/(loss) pre amortisation of acquisition intangibles 26.0 (2.0) 5.6 (0.1) (2.4) 27.1 Amortisation of acquisition intangibles (0.4) (2.0) (2.9) (0.6) (0.6) (6.5) Operating profit/(loss) 25.6 (4.0) 2.7 (0.7) (3.0) 20.6 Investment income 0.1 Finance costs (1.6) Profit before tax 19.1 Tax (5.4) Profit for the period 13.7

23

FOR THE YEAR ENDED 31 MARCH 2013 (AUDITED) £million UK

USA Doméo Spain

New Markets Total

Revenue Total revenue 309.0 100.8 73.8 60.5 9.4 553.5 Inter-segment (7.0) - - - - (7.0) External revenue 302.0 100.8 73.8 60.5 9.4 546.5 Result Segment operating profit/(loss) pre amortisation of acquisition intangibles and exceptional expenditure 78.3 9.5 21.5 3.1 (4.8) 107.6 Amortisation of acquisition intangibles (0.7) (4.0) (5.8) (1.7) (1.2) (13.4) Exceptional expenditure (10.0) - - - (15.1) (25.1) Operating profit/(loss) 67.6 5.5 15.7 1.4 (21.1) 69.1 Investment income 0.1 Finance costs (2.7) Profit before tax 66.5 Tax (24.6) Profit for the period 41.9 4. EXCEPTIONAL EXPENDITURE Exceptional expenditure of £19.0m (HY2013: nil) has been incurred in the UK. This expenditure relates to the additional expected cost of completing, by March 2014, the UK customer re-contact exercise. As a result of the customers who we have already re-contacted, we have greater visibility of the number requesting a review and the value of reimbursements being made. This forecast is higher than our original estimate and we have therefore reflected our updated assumptions in the above charge. The assumptions used relating to the number of reviews, level of reimbursement and upheld rate, require the use of judgement and estimation and therefore the actual cost could be different to that provided here. In FY13, exceptional expenditure of £25.1m was recorded relating to an impairment of goodwill in respect of Société Française de Garantie S.A. (£14.8m), UK redundancy and reorganisation costs (£4.0m), the anticipated FCA investigation costs and fine (£6.0m) and other costs (£0.3m).

5. TAX £million Six months ended

30 September 2013 (Unaudited)


(Unaudited)


(Audited) Current tax 2.9 5.6 27.1 Deferred tax (2.7) (0.2) (2.5) 0.2 5.4 24.6 The effective tax rate for the six months ended 30 September 2013 is 29.9% (Six months ended 30 September 2012: 28.5%; year ended 31 March 2013: 37.1%).

24

6. DIVIDENDS £million Six months ended



(Unaudited)


(Audited) Amounts recognised as distributions to equity holders in the period:

Final dividend for the year ended 31 March 2012 of 7.67p per share - 24.8 24.8 Interim dividend for the year ended 31 March 2013 of 3.63p per share - - 11.8 Final dividend for the year ended 31 March 2013 of 7.67p per share 24.9 - - 24.9 24.8 36.6 Proposed interim dividend for the year ended 31 March 2014 of 3.63p per share 12.0 The proposed interim dividend of 3.63p per share amounting to £12.0m was approved by the Board on 19 November 2013 and has therefore not been recorded as a liability at 30 September 2013. 7. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit or loss for the financial period by the weighted average number of ordinary shares in issue during the period. Adjusted earnings per share is calculated excluding amortisation of acquisition intangibles and exceptional expenditure. This is considered to be a better indicator of the performance of the Group. Diluted earnings per share includes the impact of dilutive share options in issue throughout the period. Earnings per share (pence)


(Unaudited)


(Unaudited)


(Audited) Basic 0.1p 4.2p 12.9p Diluted 0.1p 4.2p 12.7p Adjusted basic 5.5p 5.6p 23.0p Adjusted diluted 5.4p 5.5p 22.6p The calculation of basic and diluted earnings per share is based on the following: Weighted average number of ordinary shares (millions)


(Unaudited)


(Unaudited)


(Audited) Basic 324.9 324.1 324.3 Dilutive impact of share options 5.8 4.8 5.7 Diluted 330.7 328.9 330.0 Earnings £m £m £m Profit for the period 0.4 13.7 41.9 Amortisation of acquisition intangibles 6.0 6.5 13.4 Exceptional expenditure 19.0 - 25.1 Tax impact arising on the amortisation of acquisition intangibles and exceptional costs (7.5) (2.2) (5.9) Adjusted profit for the period 17.9 18.0 74.5

25

8. ANALYSIS OF NET DEBT £million


(Unaudited)


(Unaudited)


(Audited) Cash and cash equivalents (94.4) (52.9) (88.6) Bank loans – non-current 133.6 129.0 129.6 Finance leases 1.5 2.0 1.9 Net debt 40.7 78.1 42.9 9. PROVISIONS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013 (UNAUDITED) £million

Cost of addressing

UK matters FCA

Investigation Reorganisation

Costs

Other Total At 1 April 2013 11.5 4.3 4.0 0.3 20.1 Created in the period 19.0 - - - 19.0 Utilised in the period (6.1) (0.2) (3.0) - (9.3) At 30 September 2013 24.4 4.1 1.0 0.3 29.8 FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012 (UNAUDITED) £million

Cost of addressing

UK matters FCA


Costs Other Total At 1 April 2012 21.0 - - - 21.0 Created in the period - - - - - Utilised in the period (6.3) - - - (6.3) At 30 September 2012 14.7 - - - 14.7 FOR THE YEAR ENDED 31 MARCH 2013 (AUDITED) £million

Cost of addressing

UK matters FCA


Costs Other Total At 1 April 2012 21.0 - - - 21.0 Created in the period - 6.0 4.0 0.3 10.3 Utilised in the period (9.5) (1.7) - - (11.2) At 30 March 2013 11.5 4.3 4.0 0.3 20.1 The provision for the cost of addressing the UK matters represents management’s estimate of the Group’s liability relating to the UK issues identified in FY2012. The remaining provision is expected to be utilised within the next six months and principally relates to the cost of re-contacting customers and potential compensation. The provision is based on management’s forecasts and has been updated during the latest six month period to reflect current results (see Note 4). The assumptions used relating to the number of customers, level of compensation, response rate and upheld rate, require the use of judgement and estimation and therefore the actual cost could be different to that provided here. The FCA investigation is ongoing and is expected to take a number of months to complete. There remains uncertainty as to the nature or extent of the action that the FCA may seek to take following the conclusion of its investigation and accordingly any related financial effect. The £6.0m charge recorded at 31 March 2013 remains our best estimate of the anticipated costs of managing the FCA investigation and a fine. In March 2013, the Group announced plans to reduce the number of roles in the UK by around 300. This reorganisation is now almost fully complete and payments of £3.0m were made during the period.

26

10. SHARE CAPITAL Six months ended



(Unaudited)


(Audited) Issued and fully paid ordinary shares of 2.5p

No. 330,049,000 330,000,000 330,010,000 £m 8.2 8.2 8.2

In the period, an additional 39,000 shares were issued with a nominal value of 2.5p each creating share capital of £975 and share premium of £76,000. 11. ACQUISITIONS There were no significant acquisitions during the period (HY2013: £0.6m). Deferred consideration of £0.2m (HY2013: £0.2m) was paid during the period which related to prior period acquisitions resulting in a total net cash outflow of £0.2m (HY2013: £0.8m). 12. RETIREMENT BENEFIT SCHEMES The defined benefit plan assets have been updated to reflect their market value at 30 September 2013. Differences between the expected return on assets have been recognised as an actuarial loss in the Consolidated Statement of Comprehensive Income in accordance with the Group’s accounting policy. 13. FINANCIAL INSTRUMENTS The fair values of the Group’s financial liabilities are determined as follows:

• Deferred and contingent consideration liabilities are calculated using forecasts of future performance of acquisitions discounted to present value.

Financial instruments that are measured subsequent to initial recognition at fair value are grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.

The Group has no financial instruments with fair values that are determined by reference to Level 1 or Level 2 and there were no transfers of assets or liabilities between levels during the period. There are no non-recurring fair value measurements. The Group held the following Level 3 financial instruments at fair value: £million Level 3


(Unaudited)


(Unaudited)


(Audited) Deferred and contingent consideration at fair value through profit and loss

5.8 7.3 6.0

Current liabilities 1.8 2.4 1.8 Non current liabilities 4.0 4.9 4.2 5.8 7.3 6.0 The Directors consider that the carrying value amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values.

27

14. RELATED PARTY TRANSACTIONS Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Related party transactions in the six months ended 30 September 2013 were similar in nature to those for the year ended 31 March 2013 and amounted to HY14: £0.1m (HY2013: £0.1m). Full details of the Group’s related party transactions for the year ended 31 March 2013 are included on page 122 of the Annual Report & Accounts 2013. RESPONSIBILITY STATEMENT We confirm that to the best of our knowledge: (a) the condensed set of financial statements has been prepared in accordance with IAS 34

“Interim Financial Reporting”;

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR

4.2.8R (disclosure of related party transactions and changes therein). By order of the Board Chief Executive Officer Chief Financial Officer Richard Harpin Johnathan Ford 19 November 2013 19 November 2013 Forward Looking Statements and Other Information This interim management report 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 report 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.

28

INDEPENDENT REVIEW REPORT TO HOMESERVE PLC We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2013 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement and related notes 1 to 14. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors’ responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom’s Financial Conduct Authority. As disclosed in note 2 the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting”, as adopted by the European Union. Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 “Review of Interim Financial Information Performed by the Independent auditor of the Entity” issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards in Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we could become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom’s Financial Conduct Authority. Deloitte LLP Chartered Accountants and Statutory Auditor Birmingham, United Kingdom 19 November 2013

homeserve plc interim results for the six months ended 30 .../media/files/h/home... · new policy...

Documents