Interim Management Statement

HomeServe plc

Interim Management Statement

HomeServe plc, the international home emergency business, today publishes an Interim Management Statement for the period from 1 October 2010.

Summary and Outlook

HomeServe has continued to grow and develop its membership businesses, with good growth in customer and policy numbers. At the end of December 2010 customer numbers were 4.8m and policy numbers 10.9m, both around 14% higher than at the same time in 2009. All of our businesses are currently in their key period for marketing activity and customer renewals, and we are pleased to report that both new customer acquisition and retention rates are performing in line with our expectations. 

Our outlook for the full year remains unchanged, and we look forward to delivering another year of strong growth in line with market expectations1.

United Kingdom

In our UK business we have continued to grow both customer and policy numbers. We remain on track to achieve our full year 3-4% customer growth target, with customer numbers at 31 December 2010 over 2% higher than at the same time in 2009.

Our core utility acquisition marketing campaigns have been successful resulting in the number of UK plumbing & drains and water supply pipe policies at the end of December 2010 being higher than at the same time 2009, and our customer growth initiatives, including one contact, financial services and landlords are also delivering good results.

The UK retention rate has remained high and we are on track to achieve our full year target of a retention rate of at least 82% (FY10: 83.0%).

The coldest December on record meant customers needed HomeServe's home emergency repair engineers more than ever, with the number of jobs completed over 30% higher than in December 2009. This cold weather resulted in slightly higher gross new policy sales, as consumers sought to protect themselves from the inconvenience and cost of future home emergencies. The additional revenue from these jobs and policy sales is not material and is broadly offset by higher direct costs in the claim and repair networks.

We continue to expect the underlying UK operating margin for the current financial year to be broadly similar to the same period last year.

USA

Our US business is continuing to deliver strong growth. At the end of December 2010 customers and policies were over 50% and 75% higher respectively than at the end of December 2009 with the retention rate remaining high at around 82%.

The integration of the National Grid business has gone well and is performing in line with our plans. We continue to increase our marketing activity in the US with the first campaign to Southern California Gas' households being launched this month.

We are currently delivering strong organic growth in the US from our existing affinity partners, and our business development team is continuing discussions with a number of potential new partners as we seek to further increase the number of affinity partner households in the US.

Domeo

Domeo, our French joint venture, continues to deliver good growth in customer and policy numbers. The new marketing campaigns introduced at the end of the first half of the year are achieving good take-up rates and we expect gross new policy sales in the second half of the year to be similar to the 0.3m achieved in the second half of last year.

At the end of December 2010 customer and policy numbers were over 8% and 12% higher respectively than at the end of December 2009, with the retention rate remaining high and stable at 88%.

Spain

In Spain, both customer and policy numbers at the end of December were more than double the number we had at the end of December 2009.

We are making good progress in rolling out manufacturer warranties internationally and are pleased to announce that we have extended our relationship with Indesit with an agreement to operate their programme in Spain as well as in France.

New markets

We continue to invest in the development of our membership businesses in SFG, Belgium and Italy.

We are currently testing the roll-out of our successful UK manufacturer warranty business model in France with SFG. Initial test marketing to Indesit and Mistergooddeal customers has seen good results and we will be running further tests during the final quarter of the year. In Belgium we are continuing to progress discussions with a number of potential affinity partners, whilst in Italy we have launched our first test marketing campaign with Enel with good initial results.

The test marketing activity in Italy and SFG in France, as well as continued investment in our business development teams will as expected result in our New markets segment reporting an operating loss for the current financial year.

Financial position

The business continues to be highly cash generative with low levels of net debt and we remain on track for another year of strong earnings growth.

Conference call

A conference call for analysts and investors will take place at 8.00 am this morning. The conference call can be accessed by dialling +44 (0)20 3140 0668 and pin code 127226#. A replay of this call can be heard by dialling +44 (0)20 3140 0698 and pin code 375978# later in the day for a period of 2 weeks.

Contacts

HomeServe plc

Richard Harpin, Chief Executive

Martin Bennett, Chief Financial Officer

Mark Jones, Head of Investor Relations Tel: 01922 427979

Tulchan Group

Andrew Honnor Tel: 020 7353 4200

Christian Cowley

Martin Robinson

More information on HomeServe plc can be found on our corporate website: www.HomeServeplc.com

HomeServe's Preliminary Results for the 12 months ended 31 March 2011 will be announced on Tuesday 24 May 2011.

Notes

1. Analyst forecasts for Profit before tax* currently range from £112.0m to £117.7m based on 15 forecasts, with an average of £116.2m. Profit before tax* is defined as profit before tax excluding amortisation of acquisition intangibles, joint venture taxation and exceptional operating items.