Interim Management Statement

HomeServe plc

Interim Management Statement

HomeServe plc, the international home emergency business, today publishes its Interim Management Statement for the period from 1 October 2013.

Summary & Outlook

HomeServe is making good progress in stabilising its UK business and is continuing to invest in and grow its International businesses with new affinity partnerships and growing customer numbers and earnings.

HomeServe expects its adjusted profit before tax1 for the year ending 31 March 2014 to be in line with market expectations2.

UK

The UK business continues to trade in line with expectations. Customer numbers at 31 December 2013 were 2.1m and we now have greater confidence our UK business will stabilise customer numbers at a level of at least 2.0m. While currently in the peak renewal period, recent product enhancements and improved customer satisfaction are delivering a good retention performance and we expect full year retention to increase from the 81% reported in the first half of the year. The increased cost of these product enhancements, a higher number of new customers and providing improved customer service are expected to result in net income per customer for the year to 31 March 2014 being lower than the prior year. Marketing activity has increased relative to the prior period and is performing in line with our expectations. The cost of our customer re-contact exercise is in line with expectations.

As announced on 13 January 2014, we have received the Financial Conduct Authority's (FCA) Draft Warning Notice (the 'Notice') relating to the investigation into historic regulatory issues at HomeServe Membership Limited. The Notice proposes a financial penalty of £34.5m (assuming an early settlement discount of 30%). We therefore increased our provision by £30m.

As announced in October 2013, Martin Bennett, previously Group Chief Operating Officer, was appointed Chief Executive Officer, HomeServe Membership from 1 January 2014 replacing Jonathan King, who decided to step down from the business to pursue a Non-Executive career. 

USA

We continue to develop our US business. As at 31 March 2014, customer numbers are expected to be around 15% higher than the prior year (FY2013: 25%). Retention is strong with the rate expected to be around 80% for FY2014 (FY2013: 79%).

Our US business has signed 9 new affinity partnerships representing 0.6m partner households since 31 March 2013. We continue to expect strong growth in full year operating profit. 

France

 Doméo continues to deliver a good financial performance with the retention rate remaining strong at around 89% (FY2013: 88%). Discussions with potential new partners continue.

Spain

Reparalia, our Spanish business, continues to deliver strong customer growth. Customer numbers at year end are expected to be around double that of FY2013 (FY2013 0.4m). This customer growth and a good performance in the claims handling business is delivering operating profit progression.

New Markets

In Italy, we are making good progress in developing our sales channels and marketing activity. Discussions continue with potential partners in Germany. We expect our New Markets segment to report an FY2014 adjusted operating loss of around £6m.

Financial position

We continue to have a strong balance sheet with significant headroom against our committed facilities of £250m.

Conference call

A conference call for analysts and investors will take place at 8.45am this morning. The conference call can be accessed by dialling +44 (0)20 3 139 4830 and pin code 66789513#. A replay of this call can be heard by dialling +44 (0)20 3 426 2807 and pin code 645371# later in the day for a period of 2 weeks.

Enquiries

HomeServe plc

Richard Harpin, Group Chief Executive

Johnathan Ford, Chief Financial Officer

Linda Hardy, Investor Relations Director Tel: 01922 427 997

Tulchan Group

Christian Cowley Tel: 0207 353 4200

Martin Robinson

Notes

1. Adjusted profit before tax and adjusted operating margin exclude the amortisation of acquisition intangibles and exceptional items.

2. The range of analyst forecasts for adjusted PBT for the year ending 31 March 2014 is £81.6m to £86.3m based on forecasts as at 5 February 2014. The average of these forecasts is £84m.