HomeServe Interim results 21 November 2017

Transcription

1 HomeServe Interim results 21 November 2017

2 Highlights Outstanding performance in North America and our largest ever acquisition 125m equity placing retains balance sheet flexibility for a pipeline of exciting M&A opportunities Acquisition of the remaining 60% of Checkatrade for 54 million accelerates creation of a global online platform for home improvements Customer numbers continue to grow in all established businesses up 5% to 7.8m; retention remains strong at 82%. 1

3 Group financial summary million HY18 HY17 Δ 1 Revenue % EBITDA % Adjusted operating profit % Adjusted profit before tax % Net debt % Net debt: LTM EBITDA 1.9x 1.9x Adjusted earnings per share 6.8p 6.8p Ordinary dividend per share 4.7p 4.1p 15% 1 Percentage changes calculated on actual figures. For revenue and adjusted operating profit changes at constant currency see slide 3. 2

4 Divisional financial performance Revenue Adjusted operating profit/(loss) million HY18 HY17 CC 1 HY18 HY17 CC 1 UK % 6% (57%) (57%) North America % 30% 11.4 (1.1) France % 4% % 7% Spain % 9% % 51% % 18% % 131% New Markets (19%) (24%) (2.5) (1.7) 47% 49% Inter-segment (2.9) (2.4) 18% 18% Group % 12% % 8% 1 Constant currency: $1.37: 1; 1.22: 1. 3

5 Cash flow performance Cash generated by operations 52.7m 35.0m 9.4m 6.0m 2.3m 0.1m 294.4m 9.6m 304.0m 261.4m 56.1m 37.7m 3.3m 6.7m Net debt 31 March 2017 Adjusted EBITDA Noncash items Working capital Capital expenditure Ordinary dividend Tax Net interest Foreign exchange Other Underlying net debt M&A Net debt 30 Sept

6 Rigorous capital management M&A investment m 52 Exciting pipeline of investment opportunities: Heating, Ventilation and Air Conditioning (HVAC) 101 Policy books Home Experts Capital investment to drive efficiency and growth: 5 FY HY17 FY17 HY18 FY18 Acquisitions & Investments Checkatrade DPS 44 FY19 CRM system in the UK Claims and network management Capex m Partner payments FY HY17 14 FY17 9 HY18 FY18 Partner payments Underlying / Technology Capex guidance 5

7 UK strong customer focus Customers (m) and retention rate Focus on customer satisfaction % 80% 80% Continuing to develop growth opportunities Maintained 80% retention with customers at 2.2m Increasing seasonality. HY16 HY17 HY18 Adjusted operating profit ( m) HY16 HY17 HY18 6

8 UK - increased seasonality Adjusted operating profit ( m) HY17 Renewals Engineers Help-Link LeakBot & other growth Other various HY18 7

9 UK growth opportunities Patent granted August 2017 Continued innovation WiFi version to broaden deployment Trials underway with multiple insurers. Acquisition of Help-Link creates an end-to-end heating business Synergies between Help-Link, UK Membership and Checkatrade Plan to develop heating capabilities in all established businesses. 8

10 France progressing business development opportunities Customers (m) and retention rate 89% 89% 89% Recognition for great customer service Highest retention in the Group at 89% Strong relationships with Veolia and Suez Good business development pipeline. HY16 HY17 HY18 Adjusted operating profit ( m) HY16 HY17 HY18 9

11 Spain good growth in Membership and Claims Customers (m) and retention rate 78% 77% 78% Increased retention at 78% Strong relationship with Endesa in Membership Record number of first half jobs (0.4m) in Claims Partnership opportunities to drive medium term growth Telcos Smaller water utilities HY16 HY17 HY18 Adjusted operating profit ( m) HY16 HY17 HY18 10

12 North America outstanding performance Customers (m) and retention rate 82% 81% 82% First ever H1 profit, $14.7m Strong organic growth Customers up 12% to 3.1m Households up 8% to 53m 45 new partners Retention increased to 82% Agreement to acquire policy book of Dominion Products & Services (DPS) for $143m HY16 HY17 HY18 Proforma 1 Adjusted operating profit ($m) 14.7 (2.2) (1.6) HY16 HY17 HY18 1 Proforma includes DPS.. 11

13 Dominion Products and Services largest ever acquisition Norwalk, CT Head office, HomeServe USA Canonsburg, PA Former head office, USP Great strategic fit 0.5m customers, 1.1m policies 7.1m households Enhances geographic penetration Marketing to launch in February 2018 Competition clearance received November Chattanooga, TN Contact Centre Operations Richmond, VA Head office, Dominion Energy Utility (Dominion) brand (4) Idaho, Wyoming, Utah, West Virginia Partner brand (10) North Carolina, South Carolina, Pennsylvania, New York, Georgia, Mississippi, Arkansas, Oklahoma, Tennesse, Massachusetts Dominion & Partner brand (2) Virginia, Ohio 12

14 Strong track record of policy book acquisitions in North America Proven, successful method of supplementing organic growth Pipeline of similar utility policy book opportunities. Future M&A opportunities Size Number Total policies (m) Large > 250,000 policies Medium > 50,000 policies Small < 50,000 policies

15 North America significant progress towards future targets FY16 HY17 FY17 HY18 Proforma 1 Future Households (m) Penetration (%) Customers (m) Net income per customer ($) n/a 100 Adjusted operating margin (%) n/a 20 Adjusted operating profit / (loss) ($m) 17.5 (1.6) n/a Proforma includes DPS. 14

16 New Markets progress in Italy and new territories Joint venture in Italy with Edison Energia Ambitious partner increasing its own retail footprint Ongoing discussions for new market expansion with existing and new partners Current focus on four key targets Recent research validates the proposal for utilities to offer home assistance. 3 reasons our proposition hits home Homeowners are concerned about emergency repairs costly frequent can t find somebody for the job Homeowners are interested in purchasing cover 66% find home assisitance proposition appealing Utilities considered suitable providers 63% feel a utility company would be a suitable provider Source: HomeServe research. 15

17 UK market size 35 billion 1 Checkatrade total billings 3.1 billion 2 Checkatrade share as market leader 9% Unique web visitors a month c. 1 million Average job value 2,300 2 Checkatrade revenue 21 million % of job value 0.7% Number of tradespeople 26k 1 ONS Survey Checkatrade estimate. 16

18 Checkatrade - key learnings Customer Experience Monetisation Driving demand Recruiting tradespeople 17

19 Home Experts - good progress on developing the model What is the idea? Online platform Checked and vetted local tradespeople All 25 trades. Large, growing market Worth c. 400bn in our existing countries 1 700bn in 15 identified new markets 30x the size of the Home Assistance market 14% use an online platform today Travel market is at 25%. Second mover advantage Multiple brands 1 Source: HomeServe estimate. 18

20 Summary and outlook To be the world s most trusted provider of home repairs and improvements Home Assistance Cover Home Experts Heating installations Smart Home Devices Delighted with progress in the last 6 months Continue to expect strong growth for FY18, boosted by acquisition of DPS Growing pipeline of opportunities for future growth in all businesses. 19

21 Appendices Divisional KPIs Divisional results local currency Divisional results sterling Group balance sheet Group cash flow Foreign exchange impact Our home assistance financial business model. 20

22 Divisional KPIs UK HY18 HY17 Change Affinity partner households m Customers m % Income per customer Policies m % Policies per customer Retention rate % France HY18 HY17 Change Affinity partner households m Customers m % Income per customer % Policies m % Policies per customer Retention rate % North America HY18 HY17 Change Affinity partner households m % Customers m % Income per customer $ % Policies m % Policies per customer Retention rate % ppt Spain HY18 HY17 Change Affinity partner households m Customers m % Income per customer % Policies m % Policies per customer Retention rate % ppt 21

23 Divisional results local currency UK P&L HY18 HY17 Change Total revenue m % Operating costs m (133.7) (113.6) +18% Adjusted operating profit m % Adjusted operating profit margin % ppts France P&L HY18 HY17 Change Total revenue m % Operating costs m (29.8) (28.7) +4% Adjusted operating profit m % Adjusted operating profit margin % ppt North America P&L HY18 HY17 Change Total revenue $m % Operating costs $m (137.6) (118.8) +22% Adjusted operating profit $m 14.7 (1.6) Adjusted operating profit margin % 10 Spain P&L HY18 HY17 Change Total revenue m % Operating costs m (67.9) (64.7) +5% Adjusted operating profit m % Adjusted operating profit margin % ppts 22

24 Divisional results sterling UK P&L HY18 HY17 Change Total revenue m % Operating costs m (133.7) (113.6) +18% Adjusted operating profit m % Adjusted operating margin % ppts France P&L HY18 HY17 Change Total revenue m % Operating costs m (25.9) (23.4) +11% Adjusted operating profit m % Adjusted operating margin % ppts North America P&L HY18 HY17 Change Total revenue m % Operating costs m (106.4) (87.1) +23% Adjusted operating profit m 11.4 (1.1) Adjusted operating margin % 10 Spain P&L HY18 HY17 Change Total revenue m % Operating costs m (59.7) (53.1) +12% Adjusted operating profit m % Adjusted operating margin % ppts 23

25 Group balance sheet million HY18 HY17 Non-current assets Goodwill Other intangible assets Property, plant and equipment Interests in associates 32.9 Investments Deferred tax assets Retirement benefit assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets 1, ,063.1 Current liabilities Trade and other payables (381.9) (376.4) Current tax liabilities (5.1) (3.2) Obligations under finance leases (0.5) (0.8) Bank and other loans (38.0) (25.0) (425.5) (405.4) Net current assets Non-current liabilities Bank and other loans (328.6) (302.1) Other financial liabilities (22.7) (4.2) Deferred tax liabilities (1.6) Retirement benefit obligation (22.5) (22.1) Obligations under finance leases (0.7) (1.2) (374.5) (331.2) Total liabilities (800.0) (736.6) Net assets

26 Group cash flow million HY18 HY17 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) 25

27 Foreign exchange Effect on ( m) Average exchange rate Revenue Adj. operating profit HY18 HY17 Change HY18 HY18 North America $ (5%) France (7%) Spain (7%) New Markets (7%) 0.4 Total International Strong underlying performance with benefit of 1.7m to adjusted operating profit due to favourable FX movements +/- 10 US cent movement in /US$ would have around a 2.0m impact on full year adjusted operating profit +/- 10 Euro cent movement in / would have around a 3.0m impact on full year adjusted operating profit. 26

28 Financial business model Our UK business model FY18 100m 13m 326m 213m 63m Gross revenue IPT Underwriting Net revenue 3rd party claims handling and other income Repair network revenue Reported revenue Repair network costs AP commissions Marketing costs Call centres Overheads Adjusted operating profit 27