Acquisition, placing and trading update

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

HOMESERVE PLC

ACQUISITION, PROPOSED EQUITY PLACINGAND HY18 TRADING UPDATE

LONDON - 19 October 2017 - HomeServe plc ("HomeServe"), the international home repairs and improvements business, through its wholly owned subsidiary HomeServe USA Repair Management Corp., has entered into an agreement to acquire certain of the trade and assets of the home assistance cover business of Dominion Products and Services, Inc ("Dominion"), a wholly owned subsidiary of Dominion Energy, Inc based in Richmond, Virginia. The transaction will accelerate the growth of HomeServe's North American business and has an enterprise value of US$143 million.

To fund this transaction and retain balance sheet strength to enable the execution of an attractive pipeline of future opportunities, HomeServe has today separately announced its intention to raise up to £125 million by way of a cash placing, the equivalent of approximately 5% of issued share capital.

To support the cash placing, included in this announcement is a trading update for the period 1 April to 30 September 2017, which demonstrates a strong performance for the first half of the financial year and the Board's continued confidence in delivering further strong growth for the full year.

Transaction overview

Dominion Products and Services, Inc offers a variety of home protection programmes across 16 states, concentrated in the Mid Atlantic region of the United States. HomeServe North America has a strong track record of integrating policy books to supplement and accelerate organic growth, delivering excellent customer service and attractive ongoing returns to partners. This transaction brings a growing customer base of 0.5 million customers and 1.1 million policies, and will provide HomeServe with access to 7.1 million additional households, including those of Dominion Energy under a long term marketing agreement.

The financial rationale for this transaction is strong, with ROIC¹ in excess of HomeServe's cost of capital in the first year of ownership. The acquisition of Dominion Products and Services will be completed in two tranches, and is expected to add at least US$10 million of PBTA2 to HomeServe in FY18 following the completion of Tranche 1, and at least US$17 million in FY19 following the completion of Tranche 2. The transaction is expected to be immediately accretive to adjusted earnings per share.

Tom Rusin, CEO of HomeServe in North America, said: "This agreement with Dominion is another major step forward for HomeServe. It gives us the opportunity to add a significant number of customers, policies and new partner relationships that are complementary to our existing business. We have demonstrated over the last few years that we are capable of growing our business both organically and through utility policy book acquisitions. This is largely due to our relentless focus on the customer experience, which we believe is second to none in the home assistance marketplace."

Richard Harpin, HomeServe Founder and Group Chief Executive, said: "We have an ambitious but well-grounded growth plan for our North American business which envisages generating adjusted operating profits of US$160 million in the medium term. The acquisition of Dominion Products and Services' business brings forward the achievement of our North American targets by at least 12 months. We are assessing an exciting pipeline of further opportunities, and today's equity placing retains the balance sheet strength we want to deliver today's transaction and additional future growth across all of our businesses."

¹ROIC is defined as post tax EBIT adjusted for acquisition amortisation divided by acquisition enterprise value.

²HomeServe uses adjusted operating profit, EBITDA, adjusted PBT and adjusted EPS as its primary performance measures. These are non-IFRS measures which exclude the impact of the amortisation of acquisition intangible assets (HY18: £8m, HY17: £7m).

Transaction structure and timing

The transaction is structured in two tranches, with the portion of the business related to customers of Dominion Energy's utility affiliates anticipated to close in December 2017, subject to US competition clearance (Hart-Scott-Rodino). 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$143 million, which includes US$20 million of 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. Tranche 1 brings c.0.3 million customers, c.0.6 million policies and c.4.3 million households. Tranche 2 brings c.0.2 million customers, c. 0.5 million policies and c. 2.8 million households.

HomeServe will also pay ongoing commission to Dominion and its partners in line with other partnership agreements across the Group.

Transaction financing and use of equity placing proceeds

HomeServe intends to finance the transaction from the proceeds of a proposed cash equity placing of up to £125 million, announced separately today, which represents approximately 5% of HomeServe's issued share capital based on the closing share price on 18 October 2017. The remaining proceeds from the placing will be used to retain HomeServe's balance sheet strength and liquidity, which has always been integral to its strategy, and to provide flexibility for further inorganic investment opportunities. HomeServe's net debt / EBITDA multiple at 30 September 2017 was 1.9x. The company's progressive dividend policy remains unchanged.

Trading update

HomeServe will release its Interim Results for the six months ended 30 September 2017 on Tuesday 21 November. A summary update of the results is provided below, with financials rounded to the nearest £ million3.

HomeServe had a good first six months and remains on track to deliver further strong growth in FY 2018, as described by the company in its full year results in May 2017.

Group revenue rose 17% to £366 million, 12% on a constant currency basis, and Group adjusted operating profit was up 13% on prior year at £35 million with the benefit of £2 million favourable exchange movements. Statutory profit before tax was £21 million versus £22 million in the prior year due to an increase in interest and amortisation charges as a result of investments and acquisitions in FY17.

Richard Harpin, HomeServe Founder and Group Chief Executive, commented, "We have made excellent progress in the first six months of this financial year, with continued investment for growth in our UK business and progress with key partners in France, Spain and Italy. I am excited by the strong momentum we have in North America and the acceleration our acquisition of Dominion Products and Services will bring. I look forward to updating the market on progress with validating our Home Experts customer experience and business model when we release our Interim Results in November. We remain confident that we will deliver further strong growth in the full year."

3 The financial information in this announcement is preliminary and subject to change and further internal and external review. It has been prepared on a basis substantially consistent with the accounting policies and principles applied in the preparation of the Group's audited accounts but is not fully compliant with IAS 34 "Interim Financial Reporting." (IAS34). It is not audited nor has it been reviewed by auditors and does not contain the information required by Disclosure and Transparency Rules 4.2.7R and 4.2.8R. The Group's Interim Statement on 21 November 2017 will be prepared in accordance with IAS 34.

Performance metrics for the period ended 30 September

HomeServe's UK business continues to deliver solid operational performance and exceptional customer service, and is expected to deliver growth in FY18. As expected, UK profits in HY18 were lower than in HY17 because of the increasing seasonality of the UK business, 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. 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, which 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 profits, as expected, but marks a significant step forward in HomeServe's UK heating strategy, creating a new UK-wide home heating business which provides installations, servicing and repairs.

HomeServe's North American business had an outstanding first half year with adjusted operating profit at £11 million (HY17: loss of £1 million). Organically, the business continues to perform very well. Customer numbers increased by 12% to 3.1 million, marketing responses remain high and retention has increased 1 percentage point since last year to 82%. HomeServe's biggest acquisition to date in North America, of Utility Service Partners Inc. (USP), has been successfully integrated, delivering marketing and operating efficiencies as well as benefits to customers and partners. The business continues to sign new partners organically and has added 4 million households since last year to take the total to 53 million.

The business in France remains very profitable and continues to hold the highest retention rate in the Group at 89% (HY17: 89%). Customers grew 2% to 1.0 million (HY17: 1.0 million) and HomeServe continues to see good marketing returns with our largest partners Veolia and Suez. Key to further growth in France is developing new partnerships and there is an active pipeline of potential opportunities.

Customer numbers in Spain grew 4% to 1.3 million (HY17: 1.2 million) driven by the success of the partnership with Endesa. The increase in customer numbers and a larger volume of jobs in the 3rd party claims business have grown both revenue and profit in the first six months compared to the prior year.

Presentation/conference call

Richard Harpin (HomeServe Founder and Group Chief Executive) and David Bower (Group Chief Financial Officer) will host an audio webcast for analysts and investors at 8.30am this morning. Interested parties can listen to the presentation and view the slides online at https://3xscreen.videosync.fi/2017-10-16-homeserve.

Participants can also listen to the presentation via conference call by dialling +44 203 139 4830, pin code 52682299#.

The presentation will be followed by a question-and-answer session. Participants that wish to ask a question can do so either by phone or through the webcast interface.

Following the presentation, a replay will be made available at www.homeserveplc.com.

Contacts

About Dominion Products and Services

Dominion Products and Services is a wholly owned subsidiary of Dominion Energy, Inc, one of the largest energy and utility companies in the U.S., based in Richmond, Va. It is a full service provider of home protection programs with more than 500,000 customers across the United States. It offers a suite of home protection programs providing financial protection against the costs associated with unexpected home repairs. Dominion Products and Services currently serves the needs of customers in four of Dominion's multi-state utility territories as well as for a group of affinity partners comprised of investor-owned and municipal utilities.

For the year ended 31 December 2016, the assets subject to the transaction, included in the accounts of Dominion Products and Services, Inc. generated a gross profit of US$33.0 million (last twelve months to 31 August 2017: US$34.4 million). HomeServe's estimate of the resulting EBITDA and PBT for the year ended 31 December 2016 is US$17.8 million (last twelve months to 31 August 2017: c.US$20 million). The gross assets subject to the transaction at 31 December 2016 were US$2.3 million, being amounts receivable from individual policy holders.

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. £2.6 billion.

Forward-looking statements

This announcement contains forward-looking statements with respect to the financial condition, results and business of HomeServe plc. By their nature, forward-looking statements involve risk and uncertainty because they relate to events, and depend on circumstances, that will occur in the future. HomeServe's actual future results may differ materially from the results expressed or implied in these forward-looking statements. Nothing in this announcement should be construed as a profit forecast.

Inside Information

This announcement contains inside information for the purposes of Regulation (EU) No. 596/2014 on Market Abuse.

Advisors

Goldman Sachs International acted as sole financial advisor on the transaction.

Goldman Sachs International who is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the FCA and the Prudential Regulation Authority, is acting exclusively for HomeServe and no one else in connection with the matters referred to in this announcement and will not be responsible to anyone other than HomeServe for providing the protections afforded to the respective clients of Goldman Sachs International, or for providing advice in connection with the contents of this announcement or any other matters referred to in this announcement.

J.P. Morgan Cazenove and UBS Limited are acting as Joint Global Coordinators and Joint Bookrunners in connection with the Placing.

Each of J.P. Morgan Cazenove and UBS, who are authorised by the Prudential Regulation Authority (''PRA'') and regulated in the United Kingdom by the Financial Conduct Authority ("FCA") and the PRA, is acting exclusively for the Company in connection with the Placing and no one else and will not regard any other person as its client in relation to the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice to any other person in relation to the Placing, the contents of this Announcement or any transaction, arrangement or other matter referred to herein.

This announcement is for information purposes only and is not intended to and does not constitute, or form part of, any offer or invitation to purchase, subscribe for or otherwise acquire or dispose of, or any solicitation to purchase or subscribe for or otherwise acquire or dispose of, any securities in any jurisdiction. Persons needing advice should consult an independent financial adviser. The information contained in this announcement is not for release, publication or distribution to persons in any jurisdiction where to do so might constitute a violation of local securities laws or regulations.

This announcement has been issued by and is the sole responsibility of the Company. The information contained in this announcement is for background purposes only and does not purport to be full or complete. The information in this announcement is subject to change without notice.

The distribution of this announcement in certain jurisdictions may be restricted by law. No action has been taken by the Company, J.P.Morgan Cazenove or UBS that would permit an offering of such shares or possession or distribution of this announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this announcement comes should inform themselves about and observe any such restrictions.

Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan Cazenove and UBS by the Financial Services and Markets Act 2000, as amended or the regulatory regime established thereunder, neither of J.P. Morgan Cazenove, UBS or any of their respective affiliates, agents, directors, officers, employees, advisers, representatives or shareholders accepts any responsibility whatsoever, or makes any representation or warranty, express or implied, as to or in relation to the contents of this Announcement, including its accuracy, fairness, verification, completeness or sufficiency or for any other written or oral information made available to or publicly available to any interested party or its advisers, or any other statement made or purported to be made by it or on behalf of it, its affiliates, agents, directors, officers, employees, advisers, representatives or shareholders, the Company, its directors or any other person, in connection with the Company or the Company's proposed equity placing and nothing in this Announcement shall be relied upon as a promise or representation in this respect, whether as to the past or the future. Each of J.P. Morgan Cazenove and UBS accordingly disclaims all and any responsibility and liability whatsoever, whether arising in tort, contract or otherwise (save as referred to above), which it might otherwise have in respect of this Announcement or any such statement or other information.

ENDS