TIDMHSV
RNS Number : 0265X
Homeserve Plc
21 November 2017
HomeServe plc
Interim results for the six months ended 30 September 2017
Six months Six months
ended ended
30 September 30 September Change
2017 2016
----------------------- ------------- ------------- -------
Revenue(1) GBP366.0m GBP314.3m +16%
Statutory operating
profit GBP27.5m GBP24.6m +12%
Statutory profit
before tax GBP21.2m GBP22.2m -5%
Basic earnings per
share 5.1p 5.4p -5%
EBITDA GBP56.1m GBP47.9m +17%
Adjusted(2) operating
profit GBP35.3m GBP31.1m +13%
Adjusted(2) profit
before tax GBP29.0m GBP28.7m +1%
Adjusted(2) earnings
per share 6.8p 6.8p -
Ordinary dividend
per share 4.7p 4.1p +15%
Net debt GBP304.0m GBP252.9m +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 GBP304m, 1.9x last twelve months EBITDA at 30
September 2017 (HY17: GBP252.9m, 1.9x)
-- Balance sheet strength retained with GBP125m 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 GBP54m 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 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: GBP7.8m, HY17: GBP6.5m).
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 +44 203 139
4830, pin code 95712794# and also an audio webcast with a facility
to ask questions available via www.homeserveplc.com.
Media enquiries: Investor Relations:
Tulchan Group
Martin Robinson David Bower - Chief Financial
Lisa Jarrett-Kerr Officer
Miriam McKay - Group Communications
and IR Director
--------------------------- --------------------------------------
homeserve@tulchangroup.com miriam.mckay@homeserve.com
+44 207 353 4200 +44 7795 062564
--------------------------- --------------------------------------
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 2017. 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.
GBP2.7 billion.
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 GBP366.0m, based on increased customer
numbers and higher income per customer. Statutory operating profit
rose 12% to GBP27.5m, including a GBP1.7m 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 GBP21.2m versus GBP22.2m
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 GBP54m, GBP10m 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 GBP8.38 per share (being the
closing price on 16 November 2017).
HomeServe's successful GBP125m 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
conversion(1) 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.
(1)Cash conversion is calculated as cash generated by operations
divided by adjusted operating profit.
Financial performance for the six months ended 30 September
Statutory operating Adjusted operating
Revenue profit/(loss) profit/(loss)
GBPmillion 2017 2016 2017 2016 2017 2016
--------------- ------ ------- ------------ ------------ ------------ -----------
UK 142.8 134.8 8.2 20.7 9.1 21.2
North America 117.8 86.0 8.0 (4.0) 11.4 (1.1)
France 35.3 31.4 6.2 5.1 9.4 8.0
Spain 67.6 57.8 7.8 4.5 7.9 4.7
--------------- ------ ------- ------------ ------------ ------------ -----------
220.7 175.2 22.0 5.6 28.7 11.6
New Markets 5.4 6.7 (2.7) (1.7) (2.5) (1.7)
Inter-segment (2.9) (2.4) - - - -
--------------- ------ ------- ------------ ------------ ------------ -----------
Group 366.0 314.3 27.5 24.6 35.3 31.1
--------------- ------ ------- ------------ ------------ ------------ -----------
Inter-segment revenue principally includes royalty charges
between the UK and international businesses.
Performance metrics for the six months ended 30 September
Affinity partner Customer
households numbers (m) Policy retention
(m) rate
2017 2016 2017 2016 2017 2016
--------------- ---------- ---------- --------- -------- ------------ -----------
UK 24 24 2.2 2.2 80% 80%
North America 53 49 3.1 2.8 82% 81%
France 15 15 1.0 1.0 89% 89%
Spain 12 12 1.3 1.2 78% 77%
--------------- ---------- ---------- --------- -------- ------------ -----------
80 76 5.4 5.0 83% 83%
New Markets 1 - 0.2 0.3 - -
--------------- ---------- ---------- --------- -------- ------------ -----------
Group 105 100 7.8 7.5 82% 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.
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 GBPmillion HY18 HY17 Change
------------------------------ -------- -------- --------
Revenue
Net policy income 83.6 92.1 -9%
Repair network 46.8 38.8 +21%
Other income 12.4 3.9 +220%
------------------------------- -------- -------- --------
Total revenue 142.8 134.8 +6%
Adjusted operating costs (133.7) (113.6) +18%
------------------------------- -------- -------- --------
Adjusted operating profit 9.1 21.2 -57%
------------------------------- -------- -------- --------
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 24 24 -
Customers m 2.2 2.2 +1%
Income per customer GBP 97 97 -
Policies m 5.5 5.4 +3%
Policy retention rate % 80 80 -
----------------------------- ----- ----- ----- -------
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
GBP1.6m. 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 2017.
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.
Financial performance
Total revenue of GBP142.8m was up 6% on prior year (HY17:
GBP134.8m) 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 GBP46.8m 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 GBP12.4m (HY17: GBP3.9m) rose with increased
boiler installation income and the addition of revenue from
Help-Link.
Income per customer of GBP97 was in line with the prior year
with income from Year 2+ customers up at GBP127 (HY17: GBP126) as
customers opt for enhanced levels of cover.
Adjusted operating costs rose 18% to GBP133.7m 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 GBP12.1m. 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 2017. 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%.
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 142.1 108.7 +31%
Other income 10.2 8.5 +19%
----------------------------------- -------- -------- --------
Total revenue 152.3 117.2 +30%
----------------------------------- -------- -------- --------
Adjusted operating
costs (137.6) (118.8) +16%
----------------------------------- -------- -------- --------
Adjusted operating
profit / (loss) 14.7 (1.6) -
----------------------------------- -------- -------- --------
Adjusted operating 10% - -
margin
----------------------------------- -------- -------- --------
North America results HY18 HY17 Change
GBPmillion
------------------------------ -------------- -------- ------- -----------------
Revenue
Net policy income 110.0 79.8 +38%
Other income 7.8 6.2 +26%
Total revenue 117.8 86.0 +37%
Adjusted operating
costs (106.4) (87.1) +22%
---------------------------------------------- -------- ------- -----------------
Adjusted operating
profit / (loss) 11.4 (1.1) -
---------------------------------------------- -------- ------- -----------------
Adjusted operating 10% - -
margin
---------------------------------------------- -------- ------- -----------------
North America performance HY18 HY17 Change
metrics
----------------------------- ----- ----- ----- -------
Affinity partner households m 53 49 +8%
Customers m 3.1 2.8 +12%
Income per customer US$ 97 96 +1%
Policies m 4.8 4.3 +12%
Policy retention rate % 82 81 +1ppt
----------------------------- ----- ----- ----- -------
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
http://www.homeserveplc.com//media/files/h/homeserve-plc/documents/acquisition-and-placing-2017/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 2017.
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
2016.
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%.
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 EURmillion HY18 HY17 Change
--------------------------- ------- ------- --------
Total revenue 40.1 38.4 +4%
Adjusted operating
costs (29.8) (28.7) +4%
---------------------------- ------- ------- --------
Adjusted operating
profit 10.3 9.7 +7%
---------------------------- ------- ------- --------
Adjusted operating
margin 26% 25% +1ppt
---------------------------- ------- ------- --------
France results GBPmillion HY18 HY17 Change
--------------------------- ------- ------- -------
Total revenue 35.3 31.4 +12%
Adjusted operating costs (25.9) (23.4) +11%
---------------------------- ------- ------- -------
Adjusted operating profit 9.4 8.0 +18%
---------------------------- ------- ------- -------
Adjusted operating margin 27% 25% +2ppts
---------------------------- ------- ------- -------
France performance metrics HY18 HY17 Change
----------------------------- ----- ----- ----- -------
Affinity partner households m 15 15 -
Customers m 1.0 1.0 +2%
Income per customer EUR 103 101 +2%
Policies m 2.3 2.3 +1%
Policy retention rate % 89 89 -
----------------------------- ----- ----- ----- -------
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 EUR40.1m, 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 EUR103 (HY17: EUR101) 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 EUR29.8m, reflecting the
expected higher amortisation charge principally resulting from
customer acquisition with Suez in prior periods.
Spain
HomeServe's business in Spain delivered good growth in both its
Membership and Claims businesses.
Spain results EURmillion HY18 HY17 Change
--------------------------------- ------- ------- -------
Revenue
Membership 29.8 26.3 +13%
Claims 47.1 44.3 +6%
--------------------------------- ------- ------- -------
Total revenue 76.9 70.6 +9%
Adjusted operating costs (67.9) (64.7) +5%
--------------------------------- ------- ------- -------
Adjusted operating profit 9.0 5.9 +51%
--------------------------------- ------- ------- -------
Adjusted operating margin 12% 8% +4ppts
--------------------------------- ------- ------- -------
Spain results GBPmillion HY18 HY17 Change
--------------------------------- ------- ------- -------
Revenue
Membership 26.1 21.5 +21%
Claims 41.5 36.3 +14%
--------------------------------- ------- ------- -------
Total revenue 67.6 57.8 +17%
Adjusted operating costs (59.7) (53.1) +12%
--------------------------------- ------- ------- -------
Adjusted operating profit 7.9 4.7 +68%
--------------------------------- ------- ------- -------
Adjusted operating margin 12% 8% +4ppts
--------------------------------- ------- ------- -------
Spain performance metrics HY18 HY17 Change
----------------------------- ----- ----- ----- -------
Affinity partner households m 12 12 -
Customers m 1.3 1.2 +7%
Income per customer EUR 46 41 +10%
Policies m 1.5 1.4 +6%
Policy retention rate % 78 77 +1ppt
----------------------------- ----- ----- ----- -------
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 EUR76.9m with increases in both the
Membership and Claims businesses. The 13% increase in Membership
revenue to EUR29.8m 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 EUR46.
Revenue in the Claims business was up 6% to EUR47.1m 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.
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 GBP6m.
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 GBP54m, GBP10m 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
GBP8.38 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 2017.
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 2017
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.
GBPmillion Six months Six months
ended ended
30 September 30 September
2017 2016
------------------------------ -------------- --------------
Total revenue 366.0 314.3
Operating profit 27.5 24.6
Net finance costs (6.3) (2.4)
------------------------------ -------------- --------------
Adjusted profit before tax 29.0 28.7
Amortisation of acquisition
intangibles (7.8) (6.5)
Statutory profit before tax 21.2 22.2
Tax (5.3) (5.5)
------------------------------ -------------- --------------
Profit for the year 15.9 16.7
------------------------------ -------------- --------------
Attributable to:
Equity holders of the parent 16.0 16.7
Non-controlling interests (0.1) -
------------------------------ -------------- --------------
15.9 16.7
------------------------------ -------------- --------------
Statutory profit before tax was GBP21.2m, GBP1.0m lower than the
prior year (HY17: GBP22.2m) 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 GBP7.8m (HY17:
GBP6.5m) 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 GBP5.3m (HY17: GBP5.5m). 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.
Cash flow and financing
Cash generated by operations in the period to 30 September 2017
was GBP52.7m (HY17: GBP35.5m).
GBPmillion Six months Six months
ended ended
30 September 30 September
2017 2016
------------------------------- -------------- --------------
Adjusted operating profit 35.3 31.1
Amortisation of acquisition
intangibles (7.8) (6.5)
Operating profit 27.5 24.6
Depreciation and amortisation 28.6 23.3
Non cash items 3.3 3.2
Increase in working capital (6.7) (15.6)
------------------------------- -------------- --------------
Cash generated by operations 52.7 35.5
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 0.1 0.1
------------------------------- -------------- --------------
Net movement in cash and
bank borrowings (45.2) (79.0)
Impact of foreign exchange 2.3 (4.8)
Finance leases 0.3 0.4
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 GBP42.6m to GBP304.0m.
Net working capital increased by GBP6.7m in the period (HY17:
GBP15.6m) 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 GBP37.7m (HY17:
GBP21.5m) which included payments of GBP8.5m in respect of the
acquisition of customers originated by Endesa in Spain and Suez in
France (HY17: GBP4.1m), 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 GBP70m.
The acquisitions investment of GBP9.6m principally related to
the acquisition of Help-Link Limited in the UK whilst the prior
year investment of GBP54.0m 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 GBP304.0m (FY17: GBP261.4m;
HY17: GBP252.9m), 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
GBP400m 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 2024. Loans have variable interest
rates linked to LIBOR or EURIBOR. With around GBP130m of other
funding, principally from Private Placements, HomeServe had over
GBP200m 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 GBP125m 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 GBP6.0m, GBP3.1m 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 GBP13.6m increase in the reported
revenue and a GBP1.7m increase in adjusted operating profit of the
international businesses as summarised in the table below.
Effect on (GBPm)
Average exchange Revenue Adjusted operating
rate profit
HY18 HY17 Change HY18 HY18
--------------------- ----- ------ ------ ------- -------- -------------------
North America US$ 1.30 1.37 (5%) 6.2 0.5
France EUR 1.14 1.22 (7%) 2.4 0.6
Spain EUR 1.14 1.22 (7%) 4.6 0.6
New Markets EUR 1.14 1.22 (7%) 0.4 -
--------------------- ----- ------ ------ ------- -------- -------------------
Total International 13.6 1.7
---------------------------- ------ ------ ------- -------- -------------------
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 GBP0.7m at current rates. A ten
cent movement from current rates in the USD and the Euro would have
approximately a GBP2.0m and GBP3.0m impact respectively on full
year adjusted operating profit respectively.
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.
Six months Six months
GBPmillion ended ended
30 September 30 September
2017 2016
-------------------------------- -------------- --------------
Operating profit (statutory) 27.5 24.6
Depreciation 3.8 3.4
Amortisation 17.0 13.4
Amortisation of acquisition
intangibles 7.8 6.5
EBITDA 56.1 47.9
-------------------------------- -------------- --------------
Operating profit (statutory) 27.5 24.6
Amortisation of acquisition
intangibles 7.8 6.5
Adjusted operating profit 35.3 31.1
-------------------------------- -------------- --------------
Profit before tax 21.2 22.2
Amortisation of acquisition
intangibles 7.8 6.5
Adjusted profit before tax 29.0 28.7
-------------------------------- -------------- --------------
Percentage
-------------------------------- -------------- --------------
Statutory operating margin 7.5 7.8
Amortisation of acquisition
intangibles 2.1 2.1
Adjusted operating margin 9.6 9.9
-------------------------------- -------------- --------------
Pence per share
-------------------------------- -------------- --------------
Earnings per share (statutory) 5.1 5.4
Amortisation of acquisition
intangibles (net of tax) 1.7 1.4
Adjusted earnings per share 6.8 6.8
-------------------------------- -------------- --------------
Principal risks and uncertainties
The principal risks and uncertainties, together with the
mitigating activities, detailed on pages 42 - 49 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 177-180 of the Annual Report, a copy of which is available on
the Group's website www.HomeServeplc.com.
Condensed consolidated income statement
For the six months ended 30 September 2017
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2017 2016 2017
GBPmillion Note (Reviewed) (Reviewed) (Audited)
----------------------------- ----- -------------- -------------- ------------
Continuing operations
Revenue 3 366.0 314.3 785.0
Operating costs (339.2) (289.7) (680.5)
Share of results
of associates 0.7 - 0.2
----------------------------- ----- -------------- -------------- ------------
Operating profit 27.5 24.6 104.7
Investment income 0.1 0.1 0.3
Finance costs (6.4) (2.5) (6.7)
----------------------------- ----- -------------- -------------- ------------
Profit before tax
and amortisation
of acquisition intangibles 29.0 28.7 112.4
Amortisation of
acquisition intangibles (7.8) (6.5) (14.1)
Profit before tax 21.2 22.2 98.3
Tax 4 (5.3) (5.5) (23.9)
----------------------------- ----- -------------- -------------- ------------
Profit for the period 15.9 16.7 74.4
----------------------------- ----- -------------- -------------- ------------
Attributable to:
Equity holders of
the parent 16.0 16.7 74.4
Non-controlling
interests (0.1) - -
----------------------------- ----- -------------- -------------- ------------
15.9 16.7 74.4
----------------------------- ----- -------------- -------------- ------------
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
----------------------------- ----- -------------- -------------- ------------
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2017
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2017 2016 2017
GBPmillion (Reviewed) (Reviewed) (Audited)
-------------------------------- -------------- -------------- ------------
Profit for the period 15.9 16.7 74.4
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) 0.9 0.6
-------------------------------- -------------- -------------- ------------
0.4 (3.8) (2.8)
Items that may be reclassified
subsequently to profit
and loss:
Exchange movements on
translation of foreign
operations (1.7) 20.4 20.8
Total comprehensive
income for the period 14.6 33.3 92.4
-------------------------------- -------------- -------------- ------------
Attributable to:
Equity holders of the
parent 14.7 33.3 92.4
Non-controlling interests (0.1) - -
-------------------------------- -------------- -------------- ------------
14.6 33.3 92.4
-------------------------------- -------------- -------------- ------------
Condensed consolidated balance sheet
As at 30 September 2017
30 September 30 September 31 March
2017 2016 2017
GBPmillion Note (Reviewed) (Reviewed) (Audited)
--------------------------- ----- ------------- ------------- -----------
Non-current assets
Goodwill 324.8 290.8 301.9
Intangible assets 7 292.2 264.5 288.6
Property, plant
and equipment 37.3 36.2 37.0
Interests in associates 32.9 - 32.1
Investments 8.7 8.6 8.5
Deferred tax assets 9.0 5.5 7.6
Retirement benefit
assets 2.1 - 0.7
--------------------------- ----- ------------- ------------- -----------
707.0 605.6 676.4
--------------------------- ----- ------------- ------------- -----------
Current assets
Inventories 3.5 3.0 2.7
Trade and other
receivables 382.1 378.3 455.1
Cash and cash equivalents 8 63.8 76.2 46.2
--------------------------- ----- ------------- ------------- -----------
449.4 457.5 504.0
--------------------------- ----- ------------- ------------- -----------
Total assets 1,156.4 1,063.1 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 23.9 52.1 2.1
--------------------------- ----- ------------- ------------- -----------
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 356.4 326.5 370.0
--------------------------- ----- ------------- ------------- -----------
Equity
Share capital 9 8.4 8.4 8.4
Share premium account 49.1 44.2 45.7
Merger reserve 71.0 71.0 71.0
Share incentive
reserve 18.5 15.5 18.3
Capital redemption
reserve 1.2 1.2 1.2
Currency translation
reserve 24.6 25.9 26.3
Available for sale
reserve 1.8 1.8 1.8
Retained earnings 181.1 158.5 196.5
--------------------------- ----- ------------- ------------- -----------
Attributable to
equity holders
of the parent 355.7 326.5 369.2
Non-controlling
interests 0.7 - 0.8
--------------------------- ----- ------------- ------------- -----------
Total equity 356.4 326.5 370.0
--------------------------- ----- ------------- ------------- -----------
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2017 (Reviewed)
Available
Share Share Currency for Attributable
Share premium Other incentive translation sale Retained to equity Non-controlling Total
GBPmillion capital account reserves(1) reserve reserve reserve earnings holders interest equity
--------------- --------- --------- ------------ ----------- ------------- ----------- --------- -------------- ----------------- --------
Balance at
1 April 2017 8.4 45.7 72.2 18.3 26.3 1.8 196.5 369.2 0.8 370.0
Profit for
the period - - - - - - 16.0 16.0 (0.1) 15.9
Other
comprehensive
income for
the period - - - - (1.7) - 0.4 (1.3) - (1.3)
Dividends
paid - - - - - - (35.0) (35.0) - (35.0)
Issue of share
capital - 3.4 - - - - - 3.4 - 3.4
Share-based
payments - - - 3.6 - - - 3.6 - 3.6
Share options
exercised - - - (3.4) - - 0.1 (3.3) - (3.3)
Tax on
exercised
share
options - - - - - - 2.4 2.4 - 2.4
Deferred tax
on share
options - - - - - - 0.7 0.7 - 0.7
Balance at
30 September
2017
(Reviewed) 8.4 49.1 72.2 18.5 24.6 1.8 181.1 355.7 0.7 356.4
--------------- --------- --------- ------------ ----------- ------------- ----------- --------- -------------- ----------------- --------
For the six months ended 30 September 2016 (Reviewed)
Available
Share Share Currency for
Share premium Other incentive translation sale Retained Total
GBPmillion capital account reserves(1) reserve reserve reserve earnings equity
--------------- ---------- ---------- ------------ ------------ ------------- ------------ ---------- --------
Balance at
1 April 2016 8.3 41.1 72.1 16.0 5.5 1.8 171.8 316.6
Profit for
the period - - - - - - 16.7 16.7
Other
comprehensive
income for
the period - - - - 20.4 - (3.8) 16.6
Dividends
paid - - - - - - (27.5) (27.5)
Issue of share
capital 0.1 3.1 - - - - - 3.2
Issue of trust
shares - - 0.1 - - - (0.1) -
Share-based
payments - - - 2.6 - - - 2.6
Share options
exercised - - - (3.1) - - 0.1 (3.0)
Tax on
exercised
share options - - - - - - 1.3 1.3
Balance at
30 September
2016
(Reviewed) 8.4 44.2 72.2 15.5 25.9 1.8 158.5 326.5
--------------- ---------- ---------- ------------ ------------ ------------- ------------ ---------- --------
For the year ended 31 March 2017 (Audited)
Available
Share Share Currency for Attributable
Share premium Other incentive translation sale Retained to equity Non-controlling Total
GBPmillion capital account reserves(1) reserve reserve reserve earnings holders interest equity
----------------- --------- --------- ------------ ----------- ------------- ----------- --------- -------------- ----------------- --------
Balance at
1 April 2016 8.3 41.1 72.1 16.0 5.5 1.8 171.8 316.6 - 316.6
Profit for
the year - - - - - - 74.4 74.4 - 74.4
Other
comprehensive
income for
the year - - - - 20.8 - (2.8) 18.0 - 18.0
Dividends
paid - - - - - - (40.3) (40.3) - (40.3)
Issue of share
capital 0.1 4.6 - - - - - 4.7 - 4.7
Issue of trust
shares - - 0.1 - - - (0.1) - - -
Share-based
payments - - - 6.6 - - - 6.6 - 6.6
Share options
exercised - - - (4.3) - - 0.4 (3.9) - (3.9)
Changes in
non-controlling
interest - - - - - - - - 0.8 0.8
Obligation
under put
option - - - - - - (9.3) (9.3) - (9.3)
Tax on exercised
share
options - - - - - - 2.0 2.0 - 2.0
Deferred tax
on share
options - - - - - - 0.4 0.4 - 0.4
Balance at
31 March 2017
(Audited) 8.4 45.7 72.2 18.3 26.3 1.8 196.5 369.2 0.8 370.0
----------------- --------- --------- ------------ ----------- ------------- ----------- --------- -------------- ----------------- --------
(1)Other reserves include Merger and Capital Redemption
reserves
Condensed consolidated cash flow statement
For the six months ended 30 September 2017
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2017 2016 2017
GBPmillion (Reviewed) (Reviewed) (Audited)
--------------------------------- -------------- -------------- ------------
Operating profit 27.5 24.6 104.7
Adjustments for:
Depreciation of property,
plant and equipment 3.8 3.4 6.9
Amortisation of acquisition
intangibles 7.8 6.5 14.1
Amortisation of other
intangible assets 17.0 13.4 28.5
Share-based payments expenses 4.3 3.2 7.4
Share of profit of associates (0.7) - (0.2)
Loss on disposal of property,
plant and equipment and
software - - 0.4
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 59.4 51.1 161.0
(Increase)/decrease in
inventories (0.8) - 0.4
Decrease/(increase) in
receivables 70.3 12.9 (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 52.7 35.5 139.9
Incomes taxes paid (9.4) (8.3) (20.0)
Interest paid (6.1) (3.0) (6.7)
--------------------------------- -------------- -------------- ------------
Net cash inflow from operating
activities 37.2 24.2 113.2
--------------------------------- -------------- -------------- ------------
Investing activities
Interest received 0.1 0.1 0.3
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 - - 0.1
Proceeds on issue of share
capital 0.1 0.1 0.8
New bank and other loans
raised 221.0 42.4 103.3
Movement in bank and other
loans (157.7) 55.1 (29.8)
--------------------------------- -------------- -------------- ------------
Net cash from financing
activities 28.1 69.7 33.1
--------------------------------- -------------- -------------- ------------
Net increase/(decrease)
in cash and cash equivalents 18.1 18.5 (12.5)
Cash and cash equivalents
at beginning of period 46.2 54.2 54.2
Effect of foreign exchange
rate changes (0.5) 3.5 4.5
Cash and cash equivalents
at end of period 63.8 76.2 46.2
--------------------------------- -------------- -------------- ------------
Notes to the condensed set of financial statements
For the six months ended 30 September 2017
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 2017 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 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 2006.
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 2017.
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.
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 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IFRS 17 Insurance Contracts
IFRIC 22 Foreign Currency Transactions and
Advance Consideration
IFRIC 23 Uncertainty over Income Tax Treatments
Amendments to Classification and Measurement
IFRS 2 of Share based payment transactions
Amendments to Applying IFRS 9 Financial Instruments
IFRS 4 with IFRS 4 Insurance contracts
Amendments to Sale or Contribution of Assets
IFRS 10 and IAS between an Investor and its Associate
28 or Joint Venture
Amendments to Disclosure Initiative
IAS 7
Amendments to Recognition of Deferred Tax Assets
IAS 12 for Unrealised Losses
Amendments to Transfers of Investment Property
IAS 40
Annual Improvements 2014-2016 Cycle - IFRS 1 and IAS
to IFRSs 28 Amendments
Annual Improvements 2014-2016 Cycle - IFRS 12 Amendments
to IFRSs
Clarifications Revenue from Contracts with Customers
to IFRS 15
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 2018. 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.
For the six months ended 30 September 2017 (Reviewed)
North New
GBPmillion UK America France Spain Markets Total
------------------------------ ------ --------- ------- ------ --------- ------
Revenue
Total revenue 142.8 117.8 35.3 67.6 5.4 368.9
Inter-segment (2.9) - - - - (2.9)
------------------------------ ------ --------- ------- ------ --------- ------
External revenue 139.9 117.8 35.3 67.6 5.4 366.0
------------------------------ ------ --------- ------- ------ --------- ------
Result
Segment operating
profit/(loss) pre
amortisation of acquisition
intangibles 9.1 11.4 9.4 7.9 (2.5) 35.3
Amortisation of acquisition
intangibles (0.9) (3.4) (3.2) (0.1) (0.2) (7.8)
------------------------------ ------ --------- ------- ------ --------- ------
Operating profit/(loss) 8.2 8.0 6.2 7.8 (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 (Reviewed)
North New
GBPmillion UK America France Spain Markets Total
-------------------------- ------ --------- ------- ------ --------- ------
Revenue
Total revenue 134.8 86.0 31.4 57.8 6.7 316.7
Inter-segment (2.4) - - - - (2.4)
-------------------------- ------ --------- ------- ------ --------- ------
External revenue 132.4 86.0 31.4 57.8 6.7 314.3
-------------------------- ------ --------- ------- ------ --------- ------
Result
Segment operating
profit/(loss) pre
amortisation of
acquisition intangibles 21.2 (1.1) 8.0 4.7 (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) 5.1 4.5 (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 New
GBPmillion UK America France Spain Markets Total
------------------------------ ------- --------- ------- ------- --------- -------
Revenue
Total revenue 326.5 227.8 91.1 130.2 16.6 792.2
Inter-segment (7.2) - - - - (7.2)
------------------------------ ------- --------- ------- ------- --------- -------
External revenue 319.3 227.8 91.1 130.2 16.6 785.0
------------------------------ ------- --------- ------- ------- --------- -------
Result
Segment operating
profit/(loss) pre
amortisation of acquisition
intangibles 63.2 21.2 27.1 13.3 (6.0) 118.8
Amortisation of acquisition
intangibles (1.2) (6.5) (6.0) (0.3) (0.1) (14.1)
------------------------------ ------- --------- ------- ------- --------- -------
Operating profit/(loss) 62.0 14.7 21.1 13.0 (6.1) 104.7
------------------------------ ------- --------- ------- ------- --------- -------
Investment income 0.3
Finance costs (6.7)
------------------------------ ------- --------- ------- ------- --------- -------
Profit before tax 98.3
Tax (23.9)
------------------------------ ------- --------- ------- ------- --------- -------
Profit for the year 74.4
------------------------------ ------- --------- ------- ------- --------- -------
4. Tax
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2017 2016 2017
GBPmillion (Reviewed) (Reviewed) (Audited)
-------------- -------------- -------------- ------------
Current tax 7.6 6.2 24.9
Deferred tax (2.3) (0.7) (1.0)
-------------- -------------- -------------- ------------
5.3 5.5 23.9
-------------- -------------- -------------- ------------
The effective tax rate for the six months ended 30 September
2017 was 25% (HY17: 25%). Prevailing taxation rates in the major
jurisdictions in which the Group operates were as follows:
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2017 2016 2017
Jurisdiction (Reviewed) (Reviewed) (Audited)
---------------- -------------- -------------- ------------
United Kingdom 19% 20% 20%
United States
of America 40% 40% 40%
France 33% 33% 33%
Spain 25% 25% 25%
---------------- -------------- -------------- ------------
5. Dividends
The interim dividend of 4.7p per share (HY17: 4.1p per share)
will be paid on 5 January 2018 to shareholders on the register on 8
December 2017. The interim dividend has not been included as a
liability in these financial statements.
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2017 2016 2017
GBPmillion (Reviewed) (Reviewed) (Audited)
-------------------------- -------------- -------------- ------------
Amounts recognised
as distributions to
equity holders in the
period:
Final dividend for
the year ended 31 March
2016 of 8.9p per share - 27.5 27.6
Interim dividend for
the year ended 31 March
2017 of 4.1p per share - - 12.7
Final dividend for
the year ended 31 March
2017 of 11.2p per share 35.0 - -
35.0 27.5 40.3
-------------------------- -------------- -------------- ------------
Interim dividend for
the year ended 31 March
2018 of 4.7p per share 15.4 - -
-------------------------- -------------- -------------- ------------
6. Earnings per share
Six months Six months Year ended
ended ended
Earnings per share 30 September 30 September 31 March
2017 2016 2017
pence (Reviewed) (Reviewed) (Audited)
--------------------- -------------- -------------- ------------
Basic 5.1p 5.4p 24.0p
Diluted 5.0p 5.3p 23.6p
Adjusted basic 6.8p 6.8p 27.0p
Adjusted diluted 6.7p 6.6p 26.5p
--------------------- -------------- -------------- ------------
The calculation of basic and diluted earnings per share is based
on the following:
Six months Six months Year ended
ended ended
Weighted average number 30 September 30 September 31 March
of ordinary shares 2017 2016 2017
(millions)
(Reviewed) (Reviewed) (Audited)
----------------------------- -------------- -------------- ------------
Basic 312.0 309.4 309.9
Dilutive impact of
share options 4.8 5.1 5.4
----------------------------- -------------- -------------- ------------
Diluted 316.8 314.5 315.3
----------------------------- -------------- -------------- ------------
Earnings
GBPmillion
----------------------------- -------------- -------------- ------------
Profit attributable
to equity holders of
the parent 16.0 16.7 74.4
Amortisation of acquisition
intangibles 7.8 6.5 14.1
Tax impact arising
on the amortisation
of acquisition intangibles (2.7) (2.3) (4.9)
----------------------------- -------------- -------------- ------------
Adjusted profit for
the period 21.1 20.9 83.6
----------------------------- -------------- -------------- ------------
Basic and diluted earnings per ordinary share have been
calculated in accordance with IAS33 Earnings Per Share. Basic
earnings per share is calculated by dividing the profit or loss in
the financial period by the weighted average number of ordinary
shares in issue during the period. Adjusted earnings per share is
calculated excluding the amortisation of acquisition intangibles.
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 acquisition intangible assets
(HY18: GBP7.8m, HY17: GBP6.5m). 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. Diluted earnings per share includes the
impact of dilutive share options in issue throughout the
period.
7. Intangible assets
Trademarks
Acquisition & access Customer Total
intangibles rights Databases Software intangibles
GBPm GBPm GBPm GBPm GBPm
-------------------- ------------- ----------- ----------- --------- -------------
Cost
At 1 April 2016 146.0 31.6 55.0 125.7 358.3
Additions - 0.3 16.7 44.4 61.4
Acquisition of
subsidiary 44.3 - - 1.3 45.6
Disposals - - - (0.2) (0.2)
Exchange Movements 16.3 1.3 4.9 3.2 25.7
-------------------- ------------- ----------- ----------- --------- -------------
At 1 April 2017 206.6 33.2 76.6 174.4 490.8
Additions - 1.5 4.8 22.5 28.8
Acquisition of
subsidiary 1.5 - - - 1.5
Exchange Movements (3.7) (0.7) 1.9 (1.8) (4.3)
-------------------- ------------- ----------- ----------- --------- -------------
At 30 September
2017 204.4 34.0 83.3 195.1 516.8
-------------------- ------------- ----------- ----------- --------- -------------
Accumulated amortisation
At 1 April 2016 70.7 19.5 18.3 39.8 148.3
Charge for the
year 14.1 4.5 11.6 12.4 42.6
Disposals - - - (0.2) (0.2)
Exchange movements 7.8 0.6 1.9 1.2 11.5
-------------------- ------ ------ ----- ------ ------
At 1 April 2017 92.6 24.6 31.8 53.2 202.2
Charge for the
period 7.8 2.2 8.0 6.8 24.8
Exchange movements (2.1) (0.5) 0.8 (0.6) (2.4)
-------------------- ------ ------ ----- ------ ------
At 30 September
2017 98.3 26.3 40.6 59.4 224.6
-------------------- ------ ------ ----- ------ ------
Carrying Amount
At 30 September
2017 106.1 7.7 42.7 135.7 292.2
-------------------- ------ ------ ----- ------ ------
At 1 April 2017 114.0 8.6 44.8 121.2 288.6
-------------------- ------ ------ ----- ------ ------
8. Analysis of net debt
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2017 2016 2017
GBPmillion (Reviewed) (Reviewed) (Audited)
--------------------------- -------------- -------------- ------------
Cash and cash equivalents (63.8) (76.2) (46.2)
Bank loans and other
loans 366.6 327.1 306.0
Finance leases 1.2 2.0 1.6
--------------------------- -------------- -------------- ------------
Net debt 304.0 252.9 261.4
--------------------------- -------------- -------------- ------------
As part of the review of the long-term financing requirements of
the business, on 1 August 2017, the terms and tenure of the
existing revolving credit facility were re-evaluated and 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 available committed credit of GBP400m 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 2024. Loans have variable interest rates linked to LIBOR
or EURIBOR.
9. Share capital
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2017 2016 2017
(Reviewed) (Reviewed) (Audited)
-------------------- ------ -------------- -------------- ------------
Issued and fully
paid ordinary
shares of 2 9/13p No. 312,713,579 310,230,874 310,689,548
GBPm 8.4 8.4 8.4
--------------------------- -------------- -------------- ------------
During the period from 1 April 2017 to 30 September 2017 the
Company issued 2,024,031 shares with a nominal value of 2 9/13p
creating share capital of GBP54,493 and share premium of
GBP3,364,861.
During the period from 1 April 2016 to 30 September 2016 the
Company issued 2,338,448 shares with a nominal value of 2 9/13p
creating share capital of GBP62,958 and share premium of
GBP3,141,856.
During the period from 1 April 2016 to 31 March 2017 the Company
issued 2,797,122 shares with a nominal value of 2 9/13p creating
share capital of GBP75,307 and share premium of GBP4,696,129.
On 19 October 2017, HomeServe placed 15,243,903 of new ordinary
shares in HomeServe plc. For further details refer to Note 14.
10. Business combinations and disposals
The Group has incurred a net cash outflow in respect of business
combinations of GBP9.6m in the period principally related to the
acquisition of Help-Link UK Limited. On 2 August 2017 HomeServe
Assistance Limited, a Group company, acquired 100% of the issued
share capital and obtained control of Help-Link UK Limited.
The provisional recognised amounts of identifiable assets
acquired and liabilities assumed are set out in the table
below:
At fair value GBPm
----------------------------------------- ------
Property, plant and equipment 0.5
Inventories 0.1
Bank overdraft (1.7)
Trade and other receivables 1.4
Trade and other payables (5.8)
------------------------------------------ ------
Total identifiable net liabilities (5.5)
Intangible assets identified on
acquisition 1.5
Deferred taxation (0.3)
Goodwill 23.4
------------------------------------------ ------
19.1
----------------------------------------- ------
Satisfied by:
Cash 5.0
Contingent consideration 14.1
19.1
----------------------------------------- ------
Net cash outflow arising on acquisition
Cash consideration 5.0
Bank overdraft acquired 1.7
------------------------------------------ ------
6.7
----------------------------------------- ------
The goodwill arising on the excess of consideration over the
fair value of the assets and liabilities acquired represents the
expectation of synergy savings, efficiencies, enhancing the scale
and scope of the UK business' heating installation capability,
together with future volume growth related to new heating system
installations. None of the goodwill is expected to be deducted for
income tax purposes.
The gross contracted amounts due are equal to the fair value
amounts stated above for trade and other receivables. The
undiscounted range of outcomes associated with the contingent
consideration potentially payable is from GBPnil to GBP15.5m.
Help-Link UK Limited contributed GBP4.5m of revenue and a loss
of GBP0.7m to the Group's adjusted profit before tax for the six
months to 30 September 2017.
If the acquisition had been completed on the first day of the
financial year, Group revenue for the period would have been
GBP373.7m and Group statutory profit before tax would have been
GBP19.7m. In deriving this profit before tax figure, a benefit of
GBP9.8m was excluded from Help-Link's pre-acquisition profit for
the period from 1 April 2017 to 1 August 2017 for items that are
non-recurring.
The information above is provisional with fair value assessment
activities ongoing and the final acquisition disclosures will be
included in the Group annual report to be released in May 2018.
In addition to the net cash outflow on the Help-Link
acquisition, deferred consideration was paid relating to prior
period business combinations of GBP2.9m (HY17: GBP0.3m).
Acquisition-related costs (included in operating costs) amounted to
GBP0.5m (HY17: GBP0.8m).
11. Retirement benefit schemes
The defined benefit plan assets and liabilities have been
updated as at 30 September 2017. Differences between the expected
return on assets and movement on liabilities have been recognised
as an actuarial gain or loss in the Consolidated Statement of
Comprehensive Income in accordance with the Group's accounting
policy.
12. 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.
Transactions with associates
Related party transactions with associate interests during HY18
principally related to recharged consultancy and contractor costs
and amounted to GBP0.2m (HY17: GBPnil).
Other related party transactions
Related party transactions during HY18 were similar in nature to
those in HY17 and amounted to GBP0.2m (HY17: GBP0.1m).
Full details of the Group's related party transactions for the
year ended 31 March 2017 are included on page 188 of the Annual
Report & Accounts 2017.
13. Financial instruments
The principal financial instruments used by the Group from which
financial instrument risk arises are described in the Group's
latest audited financial statements. All principal financial
instruments are stated at amortised cost, with the exception of
deferred and contingent consideration and assets classified as
available for sale which are held at fair value. The Directors
consider that the carrying values of financial assets and financial
liabilities recorded at amortised cost in the financial statements
are approximately equal to their fair values.
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 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 2 and 3 financial instruments
at fair value:
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2017 2016 2017
GBPmillion (Reviewed) (Reviewed) (Audited)
------------------------- -------------- -------------- ------------
Level 2
Assets classified
as available for sale
Non-current assets 8.7 8.6 8.5
------------------------- -------------- -------------- ------------
8.7 8.6 8.5
------------------------- -------------- -------------- ------------
Level 3
Deferred and contingent
consideration at fair
value through profit
and loss
Current liabilities (6.1) (1.3) (2.6)
Non-current liabilities (12.7) (6.0) (5.1)
------------------------- -------------- -------------- ------------
(18.8) (7.3) (7.7)
------------------------- -------------- -------------- ------------
The GBP11.1m increase in deferred and contingent consideration
since 31 March 2017 primarily relates to the contingent
consideration in respect of the acquisition of Help-Link UK Limited
(see Note 10 above).
Contingent and deferred consideration liabilities are calculated
using forecasts of future performance of acquisitions discounted to
present value. The reconciliation of Level 3 fair value
measurements of financial liabilities is shown below:
GBPm
----------------------------------- ------
Balance at 1 April 2016 6.8
Unwinding of discount through the
income statement 0.1
Payments (0.3)
Additions 0.5
Exchange movements 0.2
------------------------------------ ------
Balance at 30 September 2016 7.3
Unwinding of discount through the
income statement 0.4
Payments (2.8)
Additions 2.7
Exchange movements 0.1
------------------------------------ ------
Balance at 31 March 2017 7.7
Unwinding of discount through the
income statement 0.4
Payments (2.9)
Additions 14.1
Released to the income statement (0.3)
Exchange movements (0.2)
------------------------------------ ------
Balance at 30 September 2017 18.8
------------------------------------ ------
14. Events after the balance sheet date
Dominion Products and Services, Inc.
On 19 October 2017 HomeServe plc announced it had entered into
an agreement to acquire certain of the trade and assets of the home
assistance cover business of Dominion Products and Services, Inc
("DPS"), a wholly owned subsidiary of Dominion Energy, Inc.
The transaction is structured in two tranches, with the portion
of the business related to customers of Dominion Energy's utility
affiliates anticipated to complete on 15 December 2017. Then,
subject to relevant partner agreements, the transfer of the
remaining portion of the business, related to customers of
investor-owned and municipal utilities, is anticipated to close
before the end of calendar year 2018.
Subject to customary working capital adjustments and changes in
the size of the acquired portfolio, the total transaction
consideration is US$143m, which includes US$20m deferred
consideration payable on a straight line annual basis over 10
years, starting in FY19. The remaining consideration is payable in
two tranches commensurate with the policies transferred.
To fund this transaction and to also retain balance sheet
strength and liquidity, on 19 October 2017, HomeServe separately
placed 15,243,903 of new ordinary shares in HomeServe plc at a
price of 820 pence per share, raising gross proceeds of
approximately GBP125m. The Placing Shares issued represent, in
aggregate, approximately 4.9 per cent of HomeServe's issued
ordinary share capital prior to the Placing.
As the acquisition of DPS has not been legally completed as at
the date of approving these condensed financial statements, it is
not required, nor possible, to include a preliminary assessment of
the fair value of the assets and liabilities acquired.
For full details on these announcements please refer to:
Acquisition, proposed equity placing and trading update
http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/HSV/13401638.html
Issue of equity
http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/HSV/13401637.html
Checkatrade
On 17 November 2017 HomeServe increased its investment in
Sherrington Mews Limited, the holding company of the Checkatrade
Group, 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 now payable of GBP54m,
GBP10m 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 GBP8.38 per share (calculated by reference to the closing
price on 16 November 2017). As the acquisition only occurred on 17
November 2017 it is not practicable to provide disclosures
regarding the fair value of the separately identifiable assets
acquired as part of this acquisition.
Energy Insurance Services Limited
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
GBP1.6m. 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 2017. As the transaction has not been legally completed as
at the date of approving these condensed financial statements, it
is not required, nor possible, to include a preliminary assessment
of the fair value of the assets and liabilities acquired.
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
David Bower
Chief Financial Officer
21 November 2017
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.
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 2017 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet,
the condensed consolidated statement of changes in equity, 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 it 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 on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would 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 2017 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
Statutory Auditor
Birmingham, United Kingdom
21 November 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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