HomeServe plc Interim results for the six months ended 30 September Revenue¹ 366.0m 314.3m +16% Statutory operating profit 27.5m 24.

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1 HomeServe plc Interim results for the six months ended 30 September September 30 September Change Revenue¹ 366.0m 314.3m +16% Statutory operating profit 27.5m 24.6m +12% Statutory profit before tax 21.2m 22.2m -5% Basic earnings per share 5.1p 5.4p -5% EBITDA 56.1m 47.9m +17% Adjusted² operating profit 35.3m 31.1m +13% Adjusted² profit before tax 29.0m 28.7m +1% Adjusted² earnings per share 6.8p 6.8p - Ordinary dividend per share 4.7p 4.1p +15% Net debt 304.0m 252.9m +20% Total customers 7.8m 7.5m +5% Continued momentum in all businesses with outstanding performance in North America Growth in customer numbers in all established regions, supported by a Group retention rate of 82% (HY17: 82%) and a global focus on customer satisfaction Solid operational performance and customer service metrics in the UK, with second half weighting of profit increasing as expected: full year growth prospects remain unchanged Strong momentum in North America, to be supplemented by HomeServe s largest ever policy book acquisition announced 19 October 2017 Continued profit growth in France and Spain Further progress on defining and testing the Home Experts model to deliver an on-demand home improvements platform Net debt of 304m, 1.9x last twelve months EBITDA at 30 September 2017 (HY17: 252.9m, 1.9x) Balance sheet strength retained with 125m equity placing on 19 October 2017 Interim dividend up 15% to 4.7p Continued expectation of further strong growth in FY18. Announcement today that HomeServe has acquired the remaining 60% of Checkatrade for 54m in cash and shares, taking its total shareholding to 100% Richard Harpin, Founder and Group Chief Executive, HomeServe plc, commented: I am delighted with the progress we made across our business in the first six months of this financial year. North America delivered outstanding organic growth, which will be further boosted by the acquisition of our largest ever policy book from Dominion Products and Services. The UK made a key strategic acquisition Help-Link to give us a stronger 1

2 foothold in the attractive boiler installations market. France and Spain developed key partner relationships and we continued to explore other partnership-based opportunities for international expansion. I am excited by the potential for HomeServe to become a global online home repairs and improvements platform, delivered via Checkatrade and Habitissimo where we already have a majority holding. Today s announcement that we are buying the remaining 60% of Checkatrade brings the realisation of this vision substantially closer. Checkatrade is the market leader in the UK, and delivers a first class customer experience. In our core home assistance business and with an even bigger opportunity in Home Experts, the prospects for growth at HomeServe have never been so strong. 1. The HY18 Trading Update made on 19 October 2017 (the Trading Update ) presented results that were subject to further internal and external review and were rounded to the nearest million with year-on-year percentage changes calculated using those rounded figures. While no amendments have been necessary to the financial and operational metrics presented in the Trading Update as a result of those reviews, the figures provided in this Interim Results Statement are now rounded to the nearest hundred thousand with percentage changes now calculated off exact figures. There may therefore be differences between the year-on-year percentage changes presented in the Trading Update and those in this Interim Results Statement. 2. The Group uses adjusted operating profit, adjusted operating margin, EBITDA, adjusted profit before tax and adjusted earnings per share as its primary performance measures. These are non-ifrs measures which exclude the impact of the amortisation of acquisition intangible assets (HY18: 7.8m, HY17: 6.5m). Acquisition intangible assets principally arise as a result of the past actions of the former owners of businesses in respect of marketing and business development activity. Therefore, the adjusted measures reflect the post acquisition revenue attributable to, and operating costs incurred by, the Group. A reconciliation between the adjusted and statutory equivalent is included in the Financial Review. Enquiries A presentation for analysts and investors will take place at 9am this morning at UBS, 5 Broadgate, London EC2M 2QS. There will be a listen-only conference call via , pin code # and also an audio webcast with a facility to ask questions available via Media enquiries: Tulchan Group Martin Robinson Lisa Jarrett-Kerr Investor Relations: David Bower Chief Financial Officer Miriam McKay Group Communications and IR Director homeserve@tulchangroup.com miriam.mckay@homeserve.com About HomeServe HomeServe is an international home repairs and improvements business, with 7.8 million customers in the UK, North America, France, Spain and Italy as at September Its comprehensive range of water, heating and electrical assistance and repair products provide customers with peace of mind. HomeServe is listed on the London Stock Exchange, with a market capitalisation of c. 2.7 billion. 2

3 BUSINESS REVIEW HomeServe made good progress in the first half of the financial year and remains on track to deliver further strong growth in FY18. Customer numbers rose in each established business to total 7.8m. Group policy retention remains high at 82%, reflecting the Group s focus on customer service. Affinity partner households rose to 105m, driven by the addition of 45 new partnerships in North America. Revenue rose 16% to 366.0m, based on increased customer numbers and higher income per customer. Statutory operating profit rose 12% to 27.5m, including a 1.7m favourable foreign exchange movement, as the Group continued to invest in its marketing and growth initiatives and completed more repairs for customers. Statutory profit before tax was 21.2m versus 22.2m in the prior year, due to an increase in interest and amortisation charges as a result of investments and acquisitions in FY17. Strategically, the Group made good progress on key initiatives. There continue to be opportunities to acquire policy books and other assets to supplement organic growth: the announcement to acquire the home assistance business of Dominion Products and Services, Inc (DPS) in North America on 19 October 2017 for a total enterprise value of $143m will be the Group s largest acquisition to date. HomeServe is developing a global heating strategy and acquired Help-Link in August 2017 in the UK to develop its boiler installations capability and create a full service heating business. There has been substantial progress on defining the business model for an online, on-demand Home Experts platform. HomeServe announces today that it has acquired the remaining 60% of Checkatrade, to take its holding to 100%. Of the total consideration of 54m, 10m is being utilised by Checkatrade s founder to subscribe for the allotment and issue of 1,193,317 HomeServe plc shares at a price of 8.38 per share (being the closing price on 16 November 2017). HomeServe s successful 125m equity placing on 19 October 2017 retained balance sheet strength and liquidity and provides flexibility for future inorganic investment opportunities, notably policy book acquisitions, heating installation capabilities and investment in Home Experts. The Group targets leverage in the range of 1.0 to 1.5x at its natural seasonal low point of 31 March but is prepared to exceed this range from time to time to pursue appropriate investments. Net debt to EBITDA at 30 September 2017 was 1.9x (HY17: 1.9x). The Group remains highly cash generative and full year cash conversion¹ is expected to be in excess of 100% (FY17: 118%). Following the equity placing and investments in DPS and Checkatrade, HomeServe expects to be within its target leverage range at the year end, before any further inorganic investment. ¹Cash conversion is calculated as cash generated by operations divided by adjusted operating profit. Financial performance for the six months ended 30 September Revenue Statutory operating profit/(loss) Adjusted operating profit/(loss) UK North America (4.0) 11.4 (1.1) France Spain New Markets (2.7) (1.7) (2.5) (1.7) Inter-segment (2.9) (2.4) Group Inter-segment revenue principally includes royalty charges between the UK and international businesses. 3

4 Performance metrics for the six months ended 30 September Affinity partner households (m) Customer numbers (m) Policy retention rate UK % 80% North America % 81% France % 89% Spain % 77% % 83% New Markets Group % 82% The Group has five operating segments: UK, North America, France, Spain and New Markets. The following sections report on the operational and financial performance of each operating segment. 4

5 UK HomeServe s business in the UK continues to deliver solid operational performance and great customer service, and is expected to deliver growth in FY18. UK results HY18 HY17 Change Revenue Net policy income % Repair network % Other income % Total revenue % Adjusted operating costs (133.7) (113.6) +18% Adjusted operating profit % Adjusted operating margin 6% 16% -10ppts Net policy income is defined as policy revenue net of sales taxes and underwriting. UK performance metrics HY18 HY17 Change Affinity partner households m Customers m % Income per customer Policies m % Policy retention rate % Income per customer is calculated by dividing the last twelve months net policy income by the number of customers. Operational performance HomeServe s plan for its core UK business is to maintain the strength of its earnings and cash flows by focusing on customer satisfaction and developing further growth opportunities for the medium term. Its core HomeServe Membership business remains focused on delivering industry-leading service to its 2.2m customers and is highly rated by customers on feedback platforms such as Trustpilot (8.4) and Reevoo (95%). Retention levels of 80% are testament to this success. Continuing initiatives to upgrade customers to more comprehensive service cover drove a modest increase in policies per customer and are expected to increase income per customer over time. The UK business has a range of organic and inorganic options to deploy capital to acquire new customers, whether from continued marketing investment with existing utility partners or policy book acquisitions, with all decisions subject to the Group s strict investment criteria. On 17 November 2017 HomeServe reached an agreement to acquire 100% of the issued share capital of Energy Insurance Services Limited (EISL) for a total cash consideration of approximately 1.6m. EISL provides boiler, central heating and control system insurance policies to approximately 19,000 domestic customers. EISL has developed significant knowledge, experience and systems related to the self-fix of boilers, which will bring customer experience improvements and synergies to HomeServe s growing UK heating business. The transaction is expected to complete by the end of November Further growth opportunities in the UK business include the build out of a full service heating business and continued investment in LeakBot. The acquisition of Help-Link Limited (Help-Link) on 2 August 2017 made HomeServe the country s second largest boiler installer and is a significant step towards the creation of a UK-wide home heating business, bringing together installations, servicing and repairs. HomeServe was granted a patent for LeakBot in August 2017 and continues to work with a number of home insurance companies in the UK and continental Europe to define a model to share the benefits of reducing costs to the insurer associated with undetected water leaks. With today s Checkatrade announcement, HomeServe moves closer in the UK to providing customers with a full home repairs and improvements service covering maintenance, repairs and installations across all trades. 5

6 Financial performance Total revenue of 142.8m was up 6% on prior year (HY17: 134.8m) due to higher repair network revenue and an increase in other income, offset by a reduction in net policy income. Repair revenue increased by 21% to 46.8m reflecting an increase in the number of completed jobs, which were up 29% year on year (HY18: 0.6m jobs, HY17: 0.5m jobs) as customers continued to use and appreciate the value of more extensive cover. Other income of 12.4m (HY17: 3.9m) rose with increased boiler installation income and the addition of revenue from Help-Link. Income per customer of 97 was in line with the prior year with income from Year 2+ customers up at 127 (HY17: 126) as customers opt for enhanced levels of cover. Adjusted operating costs rose 18% to 133.7m due to the higher volume of jobs completed both by the subcontractor network and an expanded network of directly employed engineers. There was also additional investment in growth opportunities including LeakBot and the integration of Help-Link. As expected, UK adjusted operating profit in HY18 was lower than in HY17, showing a reduction of 12.1m. Approximately half of this reduction reflects the increased seasonality of UK net policy income, with a higher proportion of customers now renewing in the second half, including recently acquired service contract policy books which have transferred to underwritten policies. The remainder of the change reflects changes in the cost base. HomeServe UK continues to invest in customer service and growth initiatives such as LeakBot, which resulted in a higher fixed cost base in the first half of the year. Directly employed engineers increased from an average of 760 to 898 compared to the same period in For the full year this investment will bring operational efficiencies, increased job income and high customer service over the busier winter period and for the full financial year. The acquisition of Help-Link in August 2017 reduced first half profit, as expected, but marks a significant step forward in HomeServe s UK heating strategy. HY18 margin fell 10ppts to 6% but the full year is expected to be in line with FY17 at around 19%. 6

7 North America HomeServe s business in North America delivered its first ever first half profit, driven by strong organic growth and the successful integration of Utility Service Partners Inc. (USP). The acquisition of the home assistance policy book of Dominion Products and Services (DPS) will bring forward HomeServe s North American growth targets by at least 12 months. North America results US$million HY18 HY17 Change Revenue Net policy income Other income % +19% Total revenue % Adjusted operating costs (137.6) (118.8) +16% Adjusted operating profit / (loss) 14.7 (1.6) - Adjusted operating margin 10% - - North America results HY18 HY17 Change Revenue Net policy income Other income % +26% Total revenue % Adjusted operating costs (106.4) (87.1) +22% Adjusted operating profit / (loss) 11.4 (1.1) - Adjusted operating margin 10% - - North America performance metrics HY18 HY17 Change Affinity partner households m % Customers m % Income per customer US$ % Policies m % Policy retention rate % ppt Income per customer is calculated by dividing the last twelve months net policy income by the number of customers. HY18 now includes USP as customers have been with HomeServe for a full 12 months, excluding USP income per customer is US$101 (HY17: US$96). Operational performance HomeServe s business in North America continued to deliver strong organic growth, driven by 45 new affinity partner signings ranging in size from small municipalities to a two million household energy utility. Customer numbers and policies both grew 12% and retention increased one percentage point to 82%, testament to HomeServe North America s s continuing focus on customer service. On 19 October 2017 HomeServe announced its largest ever US acquisition, the home assistance business of Dominion Products and Services (DPS). DPS provides a suite of home protection programmes to over 500,000 customers with 1.1m policies and has access to 7.1m households. The announcement to acquire DPS follows the successful integration of USP and confirms HomeServe s reputation as the acquirer of choice of utility policy books in North America. Full details of the acquisition can be found here /acquisition-placing-and-trading-update.pdf. Following the announcement of the deal, competition clearance (Hart-Scott Rodino) was received on 9 November 2017 and Tranche 1 is expected to complete on 15 December

8 Financial performance Revenue in North America increased 30% to US$152.3m (HY17: US$117.2m) reflecting a 12% year on year growth in customers, combined with an increase in income per customer and a full six months of revenue from customers of Utility Service Partners Inc., a business acquired part way through the prior half year in July Income per customer (excluding USP customers) increased by US$5 to US$101 (HY17: US$96) reflecting a higher number of renewals and efficiencies in the network. The 0.4m customers acquired in the prior year with USP typically hold products with a lower price point and were excluded from the income per customer figure until they had been with HomeServe for a full year. As expected, following their inclusion the overall income per customer was slightly lower at $97, though still ahead of the prior year. A further small reduction in net income per customer is anticipated for the full year reflecting the addition of DPS and the mix of products currently held by DPS customers. Other income increased 19% to US$10.2m driven in part by a 17% increase in the number of completed HVAC installations. Adjusted operating costs were up 16% to US$137.6m reflecting the growth of the business and continued investment in marketing and business development. An increase in marketing spend has delivered 0.4m gross new customers compared to 0.3m in the prior year. The scale of the business and efficient integration of USP resulted in costs growing at a lower rate than revenue, ensuring the business delivered its first ever first half profit and an adjusted operating margin of 10%. 8

9 France HomeServe s business in France continued to deliver steady growth, with potential to expand its affinity partnerships to create a broader customer base. France results million HY18 HY17 Change Total revenue % Adjusted operating costs (29.8) (28.7) +4% Adjusted operating profit % Adjusted operating margin 26% 25% +1ppt France results HY18 HY17 Change Total revenue % Adjusted operating costs (25.9) (23.4) +11% Adjusted operating profit % Adjusted operating margin 27% 25% +2ppts France performance metrics HY18 HY17 Change Affinity partner households m Customers m % Income per customer % Policies m % Policy retention rate % Operational performance With the highest level of retention in the Group and strong partner relationships with Veolia and Suez, HomeServe s business in France continued to deliver steady growth, adding new customers through direct mail and the partners own channels. Key to increasing growth in France is establishing new partnerships. There is a good business development pipeline, with discussions ongoing to grow existing partnerships and with prospective partners across the water, energy and heating markets. Financial performance Total revenue was 40.1m, an increase of 4% on HY17 due to a higher number of customers and an uplift in the income per customer, which grew 2% to 103 (HY17: 101) as a result of pricing initiatives and efficiencies in costs to serve. Further slight progression in income per customer is expected as the benefit of these initiatives flow through the second half. Operating costs increased 4% to 29.8m, reflecting the expected higher amortisation charge principally resulting from customer acquisition with Suez in prior periods. 9

10 Spain HomeServe s business in Spain delivered good growth in both its Membership and Claims businesses. Spain results million HY18 HY17 Change Revenue Membership % Claims % Total revenue % Adjusted operating costs (67.9) (64.7) +5% Adjusted operating profit % Adjusted operating margin 12% 8% +4ppts Spain results HY18 HY17 Change Revenue Membership % Claims % Total revenue % Adjusted operating costs (59.7) (53.1) +12% Adjusted operating profit % Adjusted operating margin 12% 8% +4ppts Spain performance metrics HY18 HY17 Change Affinity partner households m Customers m % Income per customer % Policies m % Policy retention rate % ppt Operational performance In Spain, both the Membership and Claims businesses performed well. The Membership business is founded on a strong relationship with Endesa, who continued to offer HomeServe s products through its sales channels and delivered the majority of the 7% customer growth in the period. As the customers successfully acquired in prior periods begin to mature, there has been an increase in retention rate to 78% (HY17: 77%) and strong progression in income per customer. Opportunities to increase medium term growth in the Membership business are centred on establishing new partnerships and to this end, discussions continue with telco providers and smaller water utilities. The Claims business completed a record number of jobs for the first half, up 5% to 0.4m and continues to work with a number of Spain s largest Bancassurers. Jobs are completed by a network of around 1,800 subcontractors (HY17: around 2,000) and 193 franchisees (HY17: 176). Financial performance Revenue increased 9% to 76.9m with increases in both the Membership and Claims businesses. The 13% increase in Membership revenue to 29.8m was mainly due to the increasing maturity of the customer portfolio and a higher proportion of renewing customers, which also drove a 10% increase in income per customer to 46. Revenue in the Claims business was up 6% to 47.1m due to the increase in completed jobs. Adjusted operating costs were 5% higher than the prior period, growing broadly in line with the increase in job volumes. 10

11 New Markets The New Markets segment consists of investments in new territories and the on-demand Home Experts model. Annual investment in this segment continues to be around 6m. The joint venture in Italy with Edison Energia is progressing as Edison continues to market HomeServe s products as part of its strategy to attract customers and expand its own footprint in the energy market. Customers fell slightly to 0.2m (HY17: 0.3m) reflecting retention losses on customers previously acquired with Enel. Business development activity continues, with active discussions in four of the 15 international markets where expansion potential has been identified. Discussions are progressing well with potential partners in Europe and Latin America. On 17 November 2017 HomeServe increased its investment in Checkatrade by 60%, taking its total holding up to 100%. The initial investment made on 13 December 2016 included an option for HomeServe to purchase a further 35% in mid 2019 and this agreement now supersedes that option as well as securing the remaining equity of the business. Of the total consideration of 54m, 10m is being utilised by Checkatrade s founder to subscribe for the allotment and issue of 1,193,317 HomeServe plc shares at a price of 8.38 per share (being the closing price on 16 November 2017). Checkatrade is fundamental to the Home Experts opportunity. Securing a controlling stake now will enable further, faster development of the proposition in the UK. HomeServe will now exercise control and Checkatrade will cease to be classified as an associate. All future results will be fully consolidated into the Group s financial statements. Checkatrade and Habitissimo are making good progress as standalone entities, with profits to be reinvested into marketing and into expanding and testing an online Home Experts platform. Good progress has been achieved testing and evaluating different consumer and tradesmen propositions to define the overall business model. This includes the lead generation approach currently undertaken by Habitissimo and the directory approach as used by Checkatrade. Increasing the monetisation of the different models will be key to success, therefore further testing and refinement is planned for the next six months. The current consumer experience at Checkatrade is rated very highly and the technology skills and ability of Habitissimo to enter other countries with little or no local footprint may bring further opportunity. Dividend The interim dividend of 4.7p per share (HY17: 4.1p), an increase of 15%, will be paid on 5 January 2018 to shareholders on the register on 8 December Board changes On 27 October 2017, it was announced that Mark Morris, Senior Independent Director and Chairman of the Audit and Risk Committee will retire from the Board on 27 February 2018 after nine years. On 27 October 2017, Ron McMillan was appointed as a Non-Executive Director and member of the Audit and Risk Committee and he will take on the Chairmanship of the Audit and Risk Committee upon Mark s retirement. As separately announced today, Stella David is to be appointed Senior Independent Director upon Mark Morris retirement. Stella was first appointed to the Board as a Non-Executive Director in November 2010 and is currently Chairman of the Remuneration Committee. Outlook HomeServe re-iterates its guidance from its Preliminary Results in May 2017 of further strong growth for FY18. This is now boosted by the acquisition of DPS, which is expected to add at least US$10m PBTA in FY18 and at least US$17m PBTA in FY19. Richard Harpin Founder and Group Chief Executive 21 November

12 FINANCIAL REVIEW These financial results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. Group statutory results The headline statutory financial results for the Group are presented below. 30 September September 2016 Total revenue Operating profit Net finance costs (6.3) (2.4) Adjusted profit before tax Amortisation of acquisition intangibles (7.8) (6.5) Statutory profit before tax Tax (5.3) (5.5) Profit for the year Attributable to: Equity holders of the parent Non-controlling interests (0.1) Statutory profit before tax was 21.2m, 1.0m lower than the prior year (HY17: 22.2m) due principally to higher finance costs and amortisation charges as a result of investments made in FY17. Statutory profit before tax is reported after the amortisation of acquisition intangibles as detailed below. Amortisation of acquisition intangibles The amortisation of acquisition intangibles of 7.8m (HY17: 6.5m) principally relates to customer and other contracts, which were acquired as part of business combinations and has increased year on year due to the acquisitions in the prior year of USP in North America and Habitissimo in Spain. Taxation The tax charge in the period was 5.3m (HY17: 5.5m). The adjusted effective tax rate was 25% (HY17: 25%). UK corporation tax is calculated at 19% in FY18, FY19 and FY20, with a proposed reduction to 17% in FY21. Taxation for other jurisdictions is calculated at the rates prevailing in the respective countries, all of which are higher than the UK rate. 12

13 Cash flow and financing Cash generated by operations in the period to 30 September 2017 was 52.7m (HY17: 35.5m). 30 September September 2016 Adjusted operating profit Amortisation of acquisition intangibles (7.8) (6.5) Operating profit Depreciation and amortisation Non cash items Increase in working capital (6.7) (15.6) Cash generated by operations Net interest (6.0) (2.9) Taxation (9.4) (8.3) Capital expenditure (37.7) (21.5) Repayment of finance leases (0.3) (0.4) Free cash flow (0.7) 2.4 Acquisition of subsidiaries (9.6) (54.0) Equity dividends paid (35.0) (27.5) Issue of shares Net movement in cash and bank borrowings (45.2) (79.0) Impact of foreign exchange 2.3 (4.8) Finance leases Opening net debt (261.4) (169.5) Closing net debt (304.0) (252.9) During the period 1 April to 30 September 2017, net debt increased by 42.6m to 304.0m. Net working capital increased by 6.7m in the period (HY17: 15.6m) reflecting the continued growth of the Group and was lower than the prior period due in part to the increasing seasonality of the UK business and a benefit of the timing of cash flows with underwriters in the UK and North America. During the period capital expenditure was 37.7m (HY17: 21.5m) which included payments of 8.5m in respect of the acquisition of customers originated by Endesa in Spain and Suez in France (HY17: 4.1m), investment in the new core customer relationship management (CRM) system in the UK and further technology spend across all businesses. Full year capital expenditure is expected to be in line with previous guidance at around 70m. The acquisitions investment of 9.6m principally related to the acquisition of Help-Link Limited in the UK whilst the prior year investment of 54.0m principally related to the acquisition of USP in North America. The Group remains highly cash generative and full year cash conversion is expected to be in excess of 100% (FY17: 118%). Earnings per share Adjusted earnings per share was in line with the prior period at 6.8p. The weighted average number of shares increased from 309.4m to 312.0m. On a statutory basis, earnings per share decreased from 5.4p to 5.1p principally due to the higher acquisition amortisation charges, the increased interest charge as a result of prior year investments and the higher weighted average number of shares. Net debt and finance costs Net debt at 30 September 2017 was 304.0m (FY17: 261.4m; HY17: 252.9m), well within the Group s financial facilities. On 1 August 2017, the Group entered into a new multi-currency revolving credit facility with both existing and new banking partners. The new terms of the facility provide committed credit of 400m which runs until 31 July 2022 with two one-year extension options, subject to agreement by the banking partners, which would extend the maturity to 31 July Loans have 13

14 variable interest rates linked to LIBOR or EURIBOR. With around 130m of other funding, principally from Private Placements, HomeServe had over 200m headroom against its available sources of debt. The Group targets leverage in the range of 1.0 to 1.5x adjusted EBITDA, measured at 31 March each year. As expected, half year net debt to EBITDA was outside this range at 1.9x due to prior year acquisitions and the seasonality of the business. Following the 125m equity placing and investments in DPS and Checkatrade, HomeServe expects to be within its target leverage range at the year end before any further inorganic investment. The Group s net interest paid was 6.0m, 3.1m higher than the prior period, principally relating to the costs of entering into the new RCF as well as higher levels of debt during the period that arose due to acquisitions and investments in FY17. Foreign exchange impact The impact of changes in the Euro and USD exchange rates between HY17 and HY18 has resulted in a 13.6m increase in the reported revenue and a 1.7m increase in adjusted operating profit of the international businesses as summarised in the table below. Effect on ( m) Average exchange rate Revenue Adjusted operating profit HY18 HY17 Change HY18 HY18 North America US$ (5%) France (7%) Spain (7%) New Markets (7%) Total International Due to the seasonality of the business and the weighting of profit to the second half, the full year translation impact of a weaker Sterling versus prior year averages is estimated to benefit adjusted operating profit by around 0.7m at current rates. A ten cent movement from current rates in the USD and the Euro would have approximately a 2.0m and 3.0m impact respectively on full year adjusted operating profit respectively. 14

15 Statutory and pro-forma reconciliations The Group believes that EBITDA, adjusted operating profit, adjusted profit before tax, adjusted operating margin and adjusted earnings per share, all of which exclude the amortisation of acquisition intangibles 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 table below provides a reconciliation between the statutory and pro-forma items. 30 September September 2016 Operating profit (statutory) Depreciation Amortisation Amortisation of acquisition intangibles EBITDA Operating profit (statutory) Amortisation of acquisition intangibles Adjusted operating profit Profit before tax Amortisation of acquisition intangibles Adjusted profit before tax Percentage Statutory operating margin Amortisation of acquisition intangibles Adjusted operating margin Pence per share Earnings per share (statutory) Amortisation of acquisition intangibles (net of tax) Adjusted earnings per share Principal risks and uncertainties The principal risks and uncertainties, together with the mitigating activities, detailed on pages of the Group's 2017 Annual Report & Accounts, continue to have the potential to impact the Group's performance and are as follows: The potential loss of a commercial relationship The impact of competition A change in customer loyalty and retention Marketing effectiveness Exposure to legislation or regulatory requirements The quality of customer service Availability of underwriters Recruitment and retention of skilled personnel Exposure to country, regional and Brexit risks IT systems become a constraint to growth and drive inefficiency instead of efficiency improvements Information Security (including cyber risk) Financial strategy and treasury risks including credit risk. Information on financial risk management is also set out on pages of the Annual Report, a copy of which is available on the Group's website 15

16 Condensed consolidated income statement For the six months ended 30 September 2017 Note 30 September September 2016 Year ended 31 March 2017 (Audited) Continuing operations Revenue Operating costs (339.2) (289.7) (680.5) Share of results of associates Operating profit Investment income Finance costs (6.4) (2.5) (6.7) Profit before tax and amortisation of acquisition intangibles Amortisation of acquisition intangibles (7.8) (6.5) (14.1) Profit before tax Tax 4 (5.3) (5.5) (23.9) Profit for the period Attributable to: Equity holders of the parent Non-controlling interests (0.1) Dividends per share 5 4.7p 4.1p 15.3p Earnings per share Basic 6 5.1p 5.4p 24.0p Diluted 6 5.0p 5.3p 23.6p 16

17 Condensed consolidated statement of comprehensive income For the six months ended 30 September September September 2016 Year ended 31 March 2017 (Audited) Profit for the period Items that will not be classified subsequently to profit and loss: Actuarial gain/(loss) on defined benefit pension scheme 0.5 (4.7) (3.4) Deferred tax (charge)/credit relating to components of other comprehensive income (0.1) (3.8) (2.8) Items that may be reclassified subsequently to profit and loss: Exchange movements on translation of foreign operations (1.7) Total comprehensive income for the period Attributable to: Equity holders of the parent Non-controlling interests (0.1) Condensed consolidated balance sheet 17

18 As at 30 September September September March 2017 (Audited) Note Non-current assets Goodwill Intangible assets Property, plant and equipment Interests in associates Investments Deferred tax assets Retirement benefit assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets 1, , ,180.4 Current liabilities Trade and other payables (381.9) (376.4) (456.2) Current tax liabilities (5.1) (3.2) (9.2) Obligation under finance leases 8 (0.5) (0.8) (0.6) Bank and other loans 8 (38.0) (25.0) (35.9) (425.5) (405.4) (501.9) Net current assets Non-current liabilities Bank and other loans 8 (328.6) (302.1) (270.1) Other financial liabilities (22.7) (4.2) (14.4) Retirement benefit obligation - (1.6) - Deferred tax liabilities (22.5) (22.1) (23.0) Obligations under finance leases 8 (0.7) (1.2) (1.0) (374.5) (331.2) (308.5) Total liabilities (800.0) (736.6) (810.4) Net assets Equity Share capital Share premium account Merger reserve Share incentive reserve Capital redemption reserve Currency translation reserve Available for sale reserve Retained earnings Attributable to equity holders of the parent Non-controlling interests Total equity

19 Condensed consolidated statement of changes in equity For the six months ended 30 September 2017 Share premium account Share incentive reserve Currency translation reserve Available for sale reserve Attributable to equity holders Share capital Other reserves¹ Retained earnings Total equity Balance at 1 April Profit for the period (0.1) 15.9 Other comprehensive income for the period (1.7) (1.3) - (1.3) Dividends paid (35.0) (35.0) - (35.0) Issue of share capital Share-based payments Share options exercised (3.4) (3.3) - (3.3) Tax on exercised share options Deferred tax on share options Balance at 30 September For the six months ended 30 September 2016 Share Share Currency Available for Share premium Other incentive translation sale Retained Total capital account reserves¹ reserve reserve reserve earnings equity Balance at 1 April Profit for the period Other comprehensive income (3.8) 16.6 for the period Dividends paid (27.5) (27.5) Issue of share capital Issue of trust shares (0.1) - Share-based payments Share options exercised (3.1) (3.0) Tax on exercised share options Balance at 30 September For the year ended 31 March 2017 (Audited) Share premium account Share incentive reserve Currency translation reserve Available for sale reserve Attributable to equity holders Noncontrolling interest Noncontrolling interest Share capital Other reserves¹ Retained earnings Total equity Balance at 1 April Profit for the year Other comprehensive income for the year (2.8) Dividends paid (40.3) (40.3) - (40.3) Issue of share capital Issue of trust shares (0.1) Share-based payments Share options exercised (4.3) (3.9) - (3.9) Changes in non-controlling interest Obligation under put option (9.3) (9.3) - (9.3) Tax on exercised share options Deferred tax on share options Balance at 31 March 2017 (Audited) ¹Other reserves include Merger and Capital Redemption reserves 19

20 Condensed consolidated cash flow statement For the six months ended 30 September September September 2016 Year ended 31 March 2017 (Audited) Operating profit Adjustments for: Depreciation of property, plant and equipment Amortisation of acquisition intangibles Amortisation of other intangible assets Share-based payments expenses Share of profit of associates (0.7) - (0.2) Loss on disposal of property, plant and equipment and software Decrease in other financial liabilities (0.3) - - Bargain purchase on acquisition - - (0.7) Profit on disposal of subsidiary - - (0.1) Operating cash flows before movements in working capital (Increase)/decrease in inventories (0.8) Decrease/(increase) in receivables (75.5) (Decrease)/increase in payables (76.2) (28.5) 54.0 Net movement in working capital (6.7) (15.6) (21.1) Cash generated by operations Incomes taxes paid (9.4) (8.3) (20.0) Interest paid (6.1) (3.0) (6.7) Net cash inflow from operating activities Investing activities Interest received Disposal of subsidiary - - (1.7) Purchases of intangible assets (33.7) (18.5) (50.9) Purchases of property, plant and equipment (4.0) (3.0) (7.6) Acquisition of investment in associate - - (24.7) Net cash outflow on acquisition of subsidiaries (9.6) (54.0) (74.2) Net cash used in investing activities (47.2) (75.4) (158.8) Financing activities Dividends paid (35.0) (27.5) (40.3) Repayment of finance leases (0.3) (0.4) (1.0) Issue of shares from the employee benefit trust Proceeds on issue of share capital New bank and other loans raised Movement in bank and other loans (157.7) 55.1 (29.8) Net cash from financing activities Net increase/(decrease) in cash and cash equivalents (12.5) Cash and cash equivalents at beginning of period Effect of foreign exchange rate changes (0.5) Cash and cash equivalents at end of period

21 Notes to the condensed set of financial statements For the six months ended 30 September 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 2017 does not constitute statutory accounts as defined in Section 434 of the Companies Act A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor 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 The condensed set of financial statements for the six months ended 30 September 2017 is unaudited, but has been reviewed by the auditor and their report to the Company is at the end of this statement. This condensed set of financial statements was approved by the Board of Directors on 21 November 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. Standards in issue but not yet effective At the date of authorisation of this condensed set of financial statements the following Standards and Interpretations, which have not been applied in these financial statements, were in issue but not yet effective (not all of which have been endorsed by the EU): IFRS 9 IFRS 15 IFRS 16 IFRS 17 IFRIC 22 IFRIC 23 Amendments to IFRS 2 Amendments to IFRS 4 Amendments to IFRS 10 and IAS 28 Amendments to IAS 7 Amendments to IAS 12 Amendments to IAS 40 Annual Improvements to IFRSs Annual Improvements to IFRSs Clarifications to IFRS 15 Financial Instruments Revenue from Contracts with Customers Leases Insurance Contracts Foreign Currency Transactions and Advance Consideration Uncertainty over Income Tax Treatments Classification and Measurement of Share based payment transactions Applying IFRS 9 Financial Instruments with IFRS 4 Insurance contracts Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Disclosure Initiative Recognition of Deferred Tax Assets for Unrealised Losses Transfers of Investment Property Cycle IFRS 1 and IAS 28 Amendments Cycle IFRS 12 Amendments Revenue from Contracts with Customers 21

22 At 31 March 2017 the Group reported that a review team had been established to assess the impact on the Group s consolidated financial statements of IFRS 9, 15 and 16. While the impact assessment remains ongoing, the Group s preliminary assessment is as follows: IFRS 9 will not have a material effect on the financial statements with only limited amendments expected to the classification of financial assets, the timing of credit loss recognition under the expected credit loss model for impairment and disclosures. IFRS 15 is unlikely to have a material effect on the financial statements. The Group s preliminary assessment indicates that, while revisions will be required to disclosures, the application of IFRS 15 will have no impact on current revenue recognition under IAS 18. The Group continues to progress its review of existing contracts to validate this initial assertion and quantify potential changes, if any. IFRS 16 will have a significant impact on certain categories of assets and liabilities within the Group Balance Sheet through the recognition of Right of Use assets and liabilities for lease payments in respect of arrangements previously classified as operating leases under IAS 17. Additionally the Group Net Debt and EBITDA measures will be significantly impacted by the replacement of operating leases with Right of Use assets and the related liabilities for lease payments; and the replacement of operational rental expenses with depreciation and interest costs associated with the balance sheet positions created at the inception of a lease. While these changes will have a significant impact on total assets and total liabilities, the impact on earnings and net assets is not expected to be material. Additional disclosures will be also be required. The Group will continue to progress its impact assessment during the second half of the financial year and provide a further update in the Annual Report for the year ended 31 March The Directors do not expect that the adoption of the other Standards and Interpretations listed above will have a material impact on the financial statements of the Group in future years. 3. Business and geographical segments Business segments IFRS 8 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. Segment profit/loss represents the result of each segment including allocated costs associated with head office and shared functions, but before allocating investment income, finance costs and tax. This is the measure reported to the Chief Executive for the purposes of resource allocation and assessment of segment performance. The accounting policies of the operating segments are the same as those described in Significant Accounting Policies in the Group s latest audited financial statements. Group cost allocations are deducted in arriving at segmental operating profit. Inter-segment revenue is charged at prevailing market prices. The sale and renewal of policies across HomeServe s business are more heavily weighted towards the second half of the financial year. 22

23 For the six months ended 30 September 2017 North America France Spain New Markets UK Total Revenue Total revenue Inter-segment (2.9) (2.9) External revenue Result Segment operating profit/(loss) pre amortisation of acquisition intangibles (2.5) 35.3 Amortisation of acquisition intangibles (0.9) (3.4) (3.2) (0.1) (0.2) (7.8) Operating profit/(loss) (2.7) 27.5 Investment income 0.1 Finance costs (6.4) Profit before tax 21.2 Tax (5.3) Profit for the period 15.9 For the six months ended 30 September 2016 North America France Spain New Markets UK Total Revenue Total revenue Inter-segment (2.4) (2.4) External revenue Result Segment operating profit/(loss) pre amortisation of acquisition intangibles 21.2 (1.1) (1.7) 31.1 Amortisation of acquisition intangibles (0.5) (2.9) (2.9) (0.2) - (6.5) Operating profit/(loss) 20.7 (4.0) (1.7) 24.6 Investment income 0.1 Finance costs (2.5) Profit before tax 22.2 Tax (5.5) Profit for the period 16.7 For the year ended 31 March 2017 (Audited) North America France Spain New Markets UK Total Revenue Total revenue Inter-segment (7.2) (7.2) External revenue Result Segment operating profit/(loss) pre amortisation of acquisition intangibles (6.0) Amortisation of acquisition intangibles (1.2) (6.5) (6.0) (0.3) (0.1) (14.1) Operating profit/(loss) (6.1) Investment income 0.3 Finance costs (6.7) Profit before tax 98.3 Tax (23.9) Profit for the year