Interim Results. November 2011

Transcription

1 Interim Results November 2011

2 Agenda 1. UK business Overview Detailed plans Financial impact Richard Harpin Jonathan King Martin Bennett 2. Interim results H1 financial performance Business performance Martin Bennett Richard Harpin 3. Questions and answers Barry Gibson

3 Issues in the UK business Issue Timescale Plan Winter complaints handling January March Re-contact exercise underway Telesales operations External review by Deloitte report completed end of September New sales scripts and staff training being implemented

4 Reinvigorating our customer focus in the UK New UK Chief Executive Complete review of sales and marketing New Customer Relations Director and recommendations Service delivery investments Bonus and incentives review Strengthening our UK board

5 Sales and marketing channel review update: Issues identified Deloitte feedback Complete Cover sales process Actions implemented Re-training of call centre agents Removed sales commission incentivisation New sales scripts being introduced Current status Inbound calls Over half of UK households now up and running Mailings Next mailing campaigns continue to be scheduled for early in the new year Outbound calls Review in progress Updating scripts before starting to re-train staff

6 Relationship with FSA Agreed a plan to resolve the complaints handling issue Addressing the sales and marketing issues - Discussed with FSA - Working on action plan Regular contact between HomeServe management and FSA

7 Reinvigorating our customer focus in the UK Complete review of sales and marketing New Customer Relations Director Developing a Customer Charter Strengthening the HomeServe UK board - Appointed a new Non-Executive Director - Appointing a Non-Executive Chairman Investing in our customer service - Additional call handling staff - Network transformation project Reviewing sales incentives to ensure a balance between quality and quantity

8 The UK Customer Journey How we contact you? What happens when you join? How we deal with unhappy customers? swift appropriate resolution of complaints Meeting the customer need 3 million customers in the UK 1 million jobs completed p.a affinity branded model fewer, better targeted contacts identify the right membership for you Customer Charter How we handle your claim? swift response keep you informed

9 Financial impact of UK issues FY12 FY13 1. One-off costs of resolving issues training, scripts and documentation enhanced control environment re-organisation costs up to 10m 2. One-off reduction in customer numbers reduced marketing activity 3. Increased ongoing costs up to 5% less customers up to 15m renewal income improved customer service strengthening of Board and controls up to up to 3m 10m potential higher cost of customer acquisition

10 Group financial highlights million H H Change Revenue % Adjusted operating profit (1) % Adjusted profit before tax (1) % Adjusted earnings per share (2) 5.2p 4.7p 11% Dividend per share 3.63p 3.3p 10% Revenue growth of 25%, driven by strong performance in International businesses Good financial performance driven by: - 11% increase in customer numbers - 13% increase in policy numbers - high stable retention rates global retention rate of 83.3% (2011: 83.9%) Low levels of net debt and strong cash conversion 1. Excluding amortisation of acquisition intangibles, and joint venture taxation 2. Excluding amortisation of acquisition intangibles

11 UK performance million Revenue H H Adjusted Operating Profit (1) Revenue Adjusted Operating Profit (1) UK Total % % International Total % (1.5) - 0.1m 50.5 (1.4) Less JV/Inter-division revenues (14.0) (11.8) Total % % Continued revenue and profit growth in the UK, driven by customer growth, and income growth Retention remains high at 82.5% (HY %) Investing in customer service initiatives - additional claims handling agents - systems development

12 International financial performance H H million Revenue Adjusted Operating Profit 1)) Revenue Adjusted Operating Profit (1) Doméo % m Spain % (1.0) - 0.2m 20.2 (0.8) USA % (0.8) + 0.4m 15.1 (1.2) % (0.5) + 0.4m 46.2 (0.9) New Markets % (1.0) - 0.5m 4.3 (0.5) Total International % (1.5) - 0.1m 50.5 (1.4) Doméo: Revenue growth of 15% and profit growth of 14% driven by a 13% increase in customer numbers Spain: - Revenue growth of 36% driven by higher customer numbers and increased claims handling volumes and margin - Operating loss has increased as a result of increased marketing investment USA: - Revenues up 100% driven by increased customer numbers, strong renewals and the National Grid business acquired in Aug 10 - Continued investment in marketing, people and infrastructure New Markets: Increased test marketing activity in Italy and SFG in France

13 Cash flow performance million H H Adjusted operating profit (1) Tax on joint venture and amortisation of acquisition intangibles (5.4) (3.5) Operating profit Depreciation, amortisation and other non-cash items (Increase) / decrease in working capital (10.3) 6.9 Cash generated Net interest (2.3) (0.7) Taxation (14.2) (9.4) Capital expenditure (5.8) (5.0) Doméo dividend received Free cash flow Acquisitions/disposals (3.0) (11.7) Equity dividends paid (22.5) (20.7) Issue of shares Net movement in cash and bank borrowings (22.3) (7.9) Impact of foreign exchange (1.3) (0.7) Finance leases (0.7) Opening net debt (12.3) (52.9) Closing net debt (36.6) (61.5) Net debt at 30 September 2011 was 36.6m In July 2011 we renewed and increased our banking facility

14 Financial summary UK Immediate short term one-off investment to resolve sales and control related issues Reinvigorate our customer focus with permanent additional operational investment International development Strong international revenue growth driven by growing customer and policy numbers High levels of retention driving strong renewal International businesses are making an increasing contribution to profits Increasing investment, as planned, in our New Markets segment Strong cash generation Continued high levels of cash conversion Strong balance sheet and low levels of net debt

15 Half year performance summary Good financial performance Growing Adjusted Profit before tax (1) m - Revenues up 25% to 213.1m - Adjusted profit before tax (1) up 10% to 23.5m +10% - Dividend per share up 10% to 3.63p - Net debt reduced to 36.6m Sept 08 Sept 09 Sept 10 Sept 11 Increasing customer and policy numbers - Worldwide customer numbers up 11% to 5.1m - Worldwide policies up 13% to 11.8m Growing customers (m) +11% - High worldwide retention rate of 83.3% Excluding amortisation of acquisition intangibles, and joint venture taxation Sept 08 Sept 09 Sept 10 Sept 11

16 UK growth in the first half year Sept 08 Sept 09 Sept 10 Sept 11 Sept 10 Sept 11 Change Customer metrics Customers (m) % Income per customer ( ) % Policy metrics Policies (m) Water Electrics Heating (HVAC) Manufacturer Warranties Other Total Policies % Retention rate (%) ppts Policies per customer New policies sold in H1 (m) Policies (m) Income per customer

17 Significant International opportunity and good progress in H1 Established international businesses (US, Doméo, Spain) H H Change % of total business Affinity Partner households 45m 46m +3% 66% Affinity Partner penetration 3.8% 4.5% +0.7ppts Customers 1.8m 2.1m +20% 40% Policies per customer % Income per customer %

18 Doméo has delivered strong customer growth Sept 08 Sept 09 Sept 10 Sept 11 Sept 2010 Sept 2011 Change Customer metrics Customers ( 000) % Income per customer ( ) % Policy metrics Policies ( 000) Water 1,658 1,902 Electrics Other Total Policies 2,014 2, % Retention rate (%) ppts Policies per customer New policies sold in H1 (m) Policies (m) Income per customer

19 Spain continues to deliver strong customer and policy growth New policies sold in H1 (000) Policies (000) Policies per customer Sept 09 Sept 10 Sept 11 Sept 2010 Sept 2011 Change Customers ( 000) % Policies ( 000) Water Electrics Other (Including Club ) Total Policies % Policies per customer

20 We continue to invest in our New Markets Italy Extended our test marketing agreement with Enel Test marketing with Veolia Acqua Expanding our network nationally Seeking to sign a long term affinity partnership Valle d Aosta Piemonte Lombardia Alto Adige Trentino Veneto Emilia-Romagna Friuli-Venezia Giulia Germany Prospecting with potential partners Germany meets our new country criteria - Large market 40m households - Insurance minded consumers - Commercially driven utilities despite fragmented market Sardegna Toscana Marche Umbria Abruzzo Lazio Molise Campania Sicilia Puglia Basilicata Calabria

21 Strong organic customer and policy growth in the US $ $58 $60 $ Sept 08 Sept 09 Sept 10 Sept 11 Sept 2010 Sept 2011 Change Customer metrics Customers ( 000) % Income per customer ($) % Policy metrics Policies ( 000) Water Electrics Heating, Ventilation & Air Conditioning Other including water heater Total Policies 1,194 1, % Retention rate (%) ppts Policies per customer New policies sold in H1 (000) Policies (000) Income per customer

22 Continuing to grow our US footprint and offering New utility partner signed 0.6m households Alberta, Canada Water and electric utility Started marketing to new partners Significantly increased marketing programme in H New markets and sales channels 2 manufacturer warranty partners signed Focusing on HVAC manufacturers HomeServe USA policies sold online through WhiteFence

23 The future UK International Worldwide Action plans in place to address the issues Significant opportunity Robust business model Restoring our customer focused culture Strong management teams High level of customer loyalty driving renewal revenues Growth in the medium term All KPIs moving forward Strong cash generation Acquisitive and organic growth opportunities

24 Appendix

25 Comparison graphs Affinity partner households 30 Total policies 10, ,500 Households (m) 15 8 Policies (000) 5,000 2, Years Years Policies per customer 3 Spain USA Doméo UK Policies per customer (x) All data as of 31 March Years

26 Comparison graphs Income per customer Operating profit 120, Operating profit ,000 80,000 60,000 40,000 20, , Years Years Spain USA Doméo UK All data as of 31 March 2011.

27 Balance sheet Group balance sheet 30 September September 2011 (Unaudited) September 2010 (Unaudited) March 2011 (Audited) 000 Non-current assets Goodwill 191, , ,080 Other intangible assets 63,689 66,955 65,618 Property, plant and equipment 38,257 32,480 38,525 Interests in joint ventures 4,753 2,921 7,614 Deferred tax assets 7,922 5,543 5, , , ,409 Current assets Inventories 1,325 1,957 2,025 Trade and other receivables 215, , ,532 Cash and cash equivalents 9,457 14,686 16, , , ,658 Total assets 531, , ,067 Current liabilities Trade and other payables (177,692) (176,064) (222,941) Current tax liabilities (7,867) (6,133) (16,093) Obligations under finance leases (388) (285) Bank and other loans (44,864) (31,559) (27,924) (230,811) (213,756) (267,243) Net current liabilities (4,986) (4,721) (1,585) Non-current liabilities Bank loans (44,634) Other financial liabilities (19,828) (23,142) (19,639) (19,828) (67,776) (19,639) Total liabilities (250,639) (281,532) (286,882) Net assets 281, , ,185

28 Our financial business model Our UK financial business model HY12 (Graph not to scale) 34m 7m 151m 110m 26m Gross revenue IPT Underwriting Net revenue 3rd party claims handling and other income 100% of revenue booked on sale majority of policies paid by monthly Direct Debit Repair network revenue Sub-contract/ directly employed Reported revenue AP comms Marketing costs Call centres Overheads Repair network costs Payment aligned with revenue receipts Operating profit

29 This presentation 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 presentation 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 on 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 presentation should be construed as a profit forecast.