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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Homeserve Plc | LSE:HSV | London | Ordinary Share | GB00BYYTFB60 | ORD 2 9/13P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1,198.00 | 1,198.00 | 1,199.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMHSV
RNS Number : 0265X
Homeserve Plc
21 November 2017
HomeServe plc
Interim results for the six months ended 30 September 2017
Hot Features
Premium
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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