27th Nov 2006 07:01
Homeserve Plc27 November 2006 Homeserve plcInterim Results for the Six Months Ended 30 September 2006 Highlights of the Period 2006 2005 Increase--------------------------------------------------------------------------------Revenue £206.0m £149.6m 38%Operating Profit * £17.3m £13.1m 32%Profit before Tax * £16.2m £12.7m 28%Profit before Tax £13.3m £11.5m 16%Earnings per Share * 18.0p 14.0p 28%Earnings per Share 14.7p 12.1p 22% • Operating profit* increased by 32% to £17.3m; • Profit before tax* increased by 28% to £16.2m; • UK utility branded new policy sales of 575,000 (2005: 560,000 excluding acquired policies); • Marketing agreement with FirstEnergy in US marks a step change in international development; • Emergency Repair businesses performing strongly. Acquisition of DIS on 26 October brings complementary claims validation for contents replacement; • Earnings per share* increased by 28% to 18.0p; • Profit before tax, including amortisation of acquisition intangibles increased by 16% to £13.3m. * Excluding amortisation of acquisition intangibles, see income statement and notes 2 & 4. Brian Whitty, Chairman, commented; "We are pleased to report another set of excellent results with all Homeserveoperations performing well. Policy sales in the UK, France and US are ahead ofthe same period last year and our Emergency Repair division has reported stronggrowth with an increase in overall activity levels. We are particularly pleased with our progress in signing our first power utilityin the US and the development of our multi-trade offering to Household Insurers.Looking ahead we remain confident of Homeserve's prospects for the full year." 27 November 2006 Enquiries: Homeserve plc Brian Whitty, Executive Chairman Tel: 01922 427900Richard Harpin, Chief Executive Tel: 01922 659701Andrew Belk, Finance Director Tel: 01922 427903 Tulchan GroupAndrew Honnor Tel: 020 7353 4200Stephen Malthouse CHAIRMAN'S STATEMENT Introduction We had an excellent first half maintaining our record of strong profits growth.Additionally, we achieved an increase in the number of new UK policies sold, thesigning of a major power utility as a partner in the US and the extension of ourservice offering within our Emergency Repair division. Interim Results In the six months ended September 2006 revenue increased by 38% to £206.0m(September 2005: £149.6m). Operating profit* increased by 32% to £17.3m(September 2005: £13.1m). These results include revenue of £32.3m and operatingprofit* of £0.6m from Improveline and the glazing division of Pilkington, whichwere acquired in December 2005 and April 2006 respectively. Profit before taxincreased by 16% to £13.3m (September 2005: £11.5m). The effective tax rate (see note 3) is unchanged at 31.0% (September 2005:31.0%). Earnings per share* increased by 28% to 18.0p (September 2005: 14.0p).Basic earnings per share increased to 14.7p from 12.1p. The Board has approved an interim dividend to be paid on 3 January 2007 of 7.5p(September 2005: 6.1p), an increase of 23.0%, providing an interim dividendpayment of £4.7m (September 2005: £3.9m). Cash generated from operations was £23.0m (September 2005: £24.3m) including anet reduction in working capital of £1.0m (September 2005: £7.8m). Net debt at30 September amounted to £44.5m (September 2005: £12.8m) principally reflectingthe acquisitions and loan notes issued during the period of £26.1m and thepurchase of shares by the Employee Benefit Trust to hedge our share schemeobligations of £7.6m. POLICY MEMBERSHIP Revenue and operating profit* of these businesses increased by 18% to £73.7m and26% to £13.1m respectively. These results include strong organic growth inHomeserve GB, an increase of £1.0m to £2.2m in the amount invested in developinginternational operations, principally the US, and an improved performance by theretail warranty business. The total number of utility branded policies,including International, has increased to 5.86m (September 2005: 4.73m, March2006: 5.52m). Homeserve GB Our UK utilities branded policy business combined strong growth in profits withnew policy sales of 575,000 (September 2005: 560,000 excluding 104,000housebuilder policies acquired in August 2005) bringing the total number ofpolicies to 5.21m (September 2005: 4.31m, March 2006: 4.97m). Revenue increasedby 17% to £67.5m (September 2005: £57.5m). As at 30 September 2006 totalpolicies were: • 3.50m in plumbing & drains and water supply pipe (September 2005: 2.98m, March 2006: 3.35m) • 0.77m in electrical (September 2005: 0.66m, March 2006: 0.76m) • 0.94m in other including gas supply pipe and housebuilder policies (September 2005: 0.67m, March 2006: 0.86m) The principal increase in policies has been for water supply pipe and gas supplypipe. The number of customers increased to 2.84m (September 2005: 2.50m, March2006: 2.79m). In addition, the number of policies per customer increased to 1.83(September 2005: 1.73, March 2006: 1.78). The majority of our marketinginvestment in the first half has been in cross sell initiatives to existingmembers. Marketing activity will continue to be more heavily weighted towardsthe second half. The average acquisition cost per policy has remained stable and customerretention rates remain at the high level of 87%. During the period, our focus on 'customer delight' ensured that 27% (March 2006:20%) rated our service as outstanding, although overall satisfaction levels havereduced slightly to 94% (September 2006: 96%, March 2006: 96%). We announced earlier in the month that Jon Florsheim will shortly be joining ourBoard. Jon, who is currently Chief Marketing Officer and Managing Director,Customer Group at BSkyB Limited, will take responsibility for the continueddevelopment of Homeserve GB as its Chief Executive. This appointment will enableRichard Harpin, who took day-to-day responsibility for this business followingJonathan King's move to our US business in July 2005, to concentrate full timeon his Homeserve plc Chief Executive role. We look forward to welcoming Jon tothe Homeserve team. Homeserve International Revenue in the first six months including our share of our joint venture inFrance was £3.2m (September 2005: £1.8m) and the operating loss* was £2.2m(September 2005: £1.2m loss). The majority of this increased investment was inour US operation, where in August we announced the signing of a major marketingagreement with FirstEnergy. The total number of international policies has increased to 646,000 (September2005: 419,000, March 2006: 549,000). Domeo, our joint venture with Veolia in France has increased policies to 480,000(September 2005: 316,000, March 2006: 416,000). Domeo now employs 150 people,including claims handling, which we have provided in house since February 2006.The number of policies per customer increased to 1.58 (March 2006: 1.50) in theperiod and retention rates increased to 89% (March 2006: 87%). Domeo commenced test marketing with one of France's major regional gascompanies, Gaz De Bordeaux, in November 2006. Initial testing is of gas supplypipe and electric wiring cover, and overall this agreement will provide accessto up to 0.2m households. Our business in the US is continuing to make good progress. In August 2006, wesigned a five year marketing agreement with FirstEnergy Corp to market homeenergy policies to their 3.4 million households in Ohio and Pennsylvania. Aspart of the transaction, we acquired 20,000 existing electrical wiring, gassupply pipe, water line and sewer line policies. This represented a step changein the development of our US business, bringing the total number of householdsto which Homeserve can market to almost 5 million. The first major marketingcampaign to FirstEnergy customers will commence in late November, targetedinitially at 1.0 million households. The prospects for potential new water and power company partners continue to beencouraging, with a particular focus on the larger energy companies. We now have 166,000 policies in the US (September 2005: 95,000, March 2006:128,000). The number of policies per customer reached 1.25 (March 2006: 1.22)and retention rates are running at 92% when "billed on the bill" and 78% whenbilled separately, reflecting the relatively low level of continuous paymentmethods used in the USA. New customer and policy acquisition levels with ourfive existing affinity partners have continued to meet our expectations. In September, we moved to larger premises in Miami in order to accommodate ouranticipated future growth. We now employ 77 people including claims handlingwhich we have provided since September 2006. This enables us to achieve greatercontrol over the quality of service delivery to our policyholders and providesincreased confidence for prospective partners. In November 2006 we commenced testing with Endesa, the largest energy company inSpain with 8.5 million domestic customers with an initial mailing of electricalwiring cover to 0.1 million households. Homeserve Retail and Manufacturer Warranties Revenue in the first six months was £5.0m (September 2005: £4.2m). WithinManufacturer Warranty, the number of policies has increased to 156,000(September 2005: 115,000, March 2006: 144,000) with growth across all majoraccounts. This growth results from continued improvements in our directmarketing through innovative products and data mining techniques. This hasresulted in good growth in customer data records through increased warranty cardregistration rates and subsequent conversion to fully paid warranties. Inaddition, we have launched our 'Instant Cover' policies where customers areoffered a policy and fixed price repair when calling us or the appliancemanufacturer in response to a boiler or appliance breakdown. The Retail Warranty business achieved a breakeven result for the first half(September 2005: £0.6m loss). This improved performance has resulted from thesign up of new retail customers, combined with a reduction in the cost base ofthe business. Further progress is expected in the second half of the year. EMERGENCY REPAIR Revenue and operating profit* of these businesses increased by 52% and 57% to£137.6m and £4.2m respectively. The acquisitions of Pilkington and Improvelinecontributed revenue of £32.3m (September 2005: £nil) and operating profit* of£0.6m (September 2005: £nil). Organic growth of 16% in revenue and 34% inoperating profit* was also achieved. The Emergency Repair businesses are continuing to make good progress indeveloping their integrated range of emergency trades provided to homeowners viatheir Household Insurers, as well as our own policy members. Our offering wasstrengthened with the acquisition of Digital Insurance Services Limited (DIS) inOctober 2006. DIS is a leading provider of home insurance contents, claimsvalidation and fulfilment services and is highly complementary to our existingservices provided to Household Insurers. The acquisition now enables us toprovide a complete solution to a major insurance claim. In order to develop our multi-trade offer further, we are in the process ofimplementing common job management systems across each of our Emergency Repairbusinesses, enabling us to increase the efficiency of our complete repairservice for Household Insurers. This will assist in winning more multi-tradedeals similar to that provided to Liverpool Victoria. In addition, we havepurchased market leading claims handling software provided by GuidewireSoftware, Inc, a leading provider of these systems in the USA, which will enableus to offer a first point of claims notification service to Household Insurersfor their domestic customers. This system will be live by late 2007. Homeserve Glass, Plumbing and Drains This business has delivered another strong performance in the first half.Revenue increased by 20% to £37.1m (September 2005: £30.8m). Fitter Package, our engineer incentive scheme, continues to deliver improvementsin service delivery and productivity. Fitter Package is currently being testedin our directly employed first fix plumbing and drains operation and should befully implemented by the end of the financial year following its success inGlass. The conversion of leads to invoiced sales within Glass, a key productivitymeasure, increased to 92% (March 2006: 90%) and reflects the operationalbenefits associated with improved workflow management and IT systemenhancements. This has been combined with a change in the mix of work towardslarger claims, which has compensated for the continued reduction in claimsvolumes experienced across the market. The acquisition of the glazing division of Pilkington in April 2006 broughtadditional Household Insurance customers and 44 directly employed glaziers. Weare currently in the process of fully integrating this business with ourexisting network. Pilkington contributed revenues in the first half of £5.9m. Homeserve Property Repairs Revenue in the first six months increased by 146% to £60.2m (September 2005:£24.4m), including £26.5m from Improveline which was acquired in December 2005.Our two property repair businesses have experienced high levels of activity inthe first half of the year. In particular, the number of claims received in ourexisting building repair network has increased by 66%, with our firstmulti-trade assistance contract contributing strong growth. The integration ofImproveline with our existing building repair network is expected to becompleted by late 2007. These businesses are performing well and are ideally positioned to benefit fromadditional volumes in the seasonally busier second half of the year. Fire and Flood Restoration Chem-Dry contributed revenue of £23.3m (September 2005: £22.4m). The fire andflood restoration business is performing well, although profits have been heldback in the first half of the year by our investment in developing a nationaldirectly employed carpet inspection, cleaning and replacement network. This is amarket which is poorly served and we believe that there is a significantopportunity for us to provide a high quality service to Household Insurers,complementing our other networks. We expect to see volumes for this work startto increase in the second half of the year. PROSPECTS We expect our Policy Membership business in the UK to continue to see policy andprofits growth in the second half, its busiest period of the year.Internationally, we expect to see further growth in the number of policies,particularly in the US as we increase our marketing activity following theaddition of FirstEnergy as a new partner. We are continuing to make goodprogress in developing our pipeline of potential new US partners. Our Emergency Repair businesses are performing strongly and are well positionedto benefit from continued high levels of activity particularly for buildingrepairs, during the busy winter period. As in prior years, profits will continue to be significantly weighted to thesecond half of the year. This reflects the seasonal profile for both policyrenewal and emergency repair work. The Directors remain confident of Homeserve's prospects for the year. Brian Whitty Executive Chairman27 November 2006 * before amortisation of acquisition intangibles - see income statement and notes 2 & 4. GROUP INCOME STATEMENTFor the six months ended 30 September 2006 Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Note £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited)Continuing Operations Revenue 2 205,975 149,630 367,001Operating costs: Amortisation of intangible assets on acquisition (2,898) (1,214) (3,658) Other operating costs (188,416) (136,552) (312,919)------------------------------------------------------------------------------- Operating costs (191,314) (137,766) (316,577)Share of results ofjoint ventures (268) - 328------------------------------------------------------------------------------- Operating profit 2 14,393 11,864 50,752 Investment income 576 431 702Finance costs (1,660) (813) (1,478)-------------------------------------------------------------------------------Profit before tax and 16,207 12,696 53,634amortisation of intangibleassets on acquisition Amortisation ofintangible assetson acquisition (2,898) (1,214) (3,658)------------------------------------------------------------------------------- Profit before tax 13,309 11,482 49,976Tax 3 (4,156) (3,936) (15,527)-------------------------------------------------------------------------------Profit for the period, being attributable to equity holders of the parent 9,153 7,546 34,449------------------------------------------------------------------------------- Dividends per share 5 7.5p 6.1p 20.0p Earnings per share 4Basic 14.7p 12.1p 55.1pDiluted 14.2p 11.8p 53.6p GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the six months ended 30 September 2006 Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Note £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited)Exchangedifferences ontranslation offoreign operations 7 (60) 117 120Actuarial losses ondefined benefitpension scheme (186) (850) (422)Current tax on additional 132 - 468pension contributionDeferred tax onitems takendirectly to equity (46) 255 (415)-------------------------------------------------------------------------------Net expenserecognised directlyin equity (160) (478) (249) Profit for the period 9,153 7,546 34,449------------------------------------------------------------------------------- Total recognised income and expense for the period attributable to equityholders of the parent 8,993 7,068 34,200------------------------------------------------------------------------------- GROUP BALANCE SHEET30 September 2006 30 September 30 September 31 March 2006 2005 2006 Note £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited)Non-current assetsGoodwill 189,263 165,945 187,022Other intangible assets 37,168 20,451 31,824Property, plant and equipment 32,363 25,243 30,727Interests in joint ventures 924 864 1,192Deferred tax asset - 736 -------------------------------------------------------------------------------- 259,718 213,239 250,765------------------------------------------------------------------------------- Current assetsInventories 6,852 2,318 5,708Trade and other receivables 115,296 86,240 127,913Cash and cash equivalents 21,824 13,284 17,081------------------------------------------------------------------------------- 143,972 101,842 150,702------------------------------------------------------------------------------- Total assets 403,690 315,081 401,467------------------------------------------------------------------------------- Current liabilitiesTrade and other payables (126,053) (91,256) (133,339)Current tax liabilities (7,269) (7,689) (10,164)Bank overdrafts and loans (66,280) (26,042) (33,411)------------------------------------------------------------------------------- (199,602) (124,987) (176,914)------------------------------------------------------------------------------- Net current liabilities (55,630) (23,145) (26,212)------------------------------------------------------------------------------- Non-current liabilitiesOther financial liabilities (3,542) (13,574) (18,785)Retirement benefit obligation (983) (3,428) (1,156)Deferred tax liabilities (2,006) - (3,503)------------------------------------------------------------------------------- (6,531) (17,002) (23,444)------------------------------------------------------------------------------- Total liabilities (206,133) (141,989) (200,358)-------------------------------------------------------------------------------Net assets 197,557 173,092 201,109------------------------------------------------------------------------------- EquityShare capital 7 8,108 8,062 8,075Share premium account 7 30,925 29,360 29,998Merger reserve 7 70,992 70,992 70,992Own shares reserve 7 (24,226) (16,189) (16,668)Share incentive reserve 7 2,989 2,072 1,626Capital redemption reserve 7 1,200 1,200 1,200Currency translation reserve 7 60 117 120Retained earnings 7 107,509 77,478 105,766-------------------------------------------------------------------------------Total equity 197,557 173,092 201,109------------------------------------------------------------------------------- GROUP CASH FLOW STATEMENTFor the six months ended 30 September 2006 Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Note £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited) Operating profit 14,393 11,864 50,752Adjustments for:Depreciation of property, 2,301 1,754 4,115plant and equipmentAmortisation of intangible 2,898 1,214 3,658assets on acquisitionAmortisation of other 880 719 1,468intangible assetsShare based payments 1,541 872 2,058expenseShare of results injoint ventures 268 - (328)(Profit)/loss ondisposal ofproperty, plant andequipment (300) 47 128Additional pensioncontributions - - (2,000)-------------------------------------------------------------------------------Operating cash flows before 21,981 16,470 59,851movements in workingcapital (Increase)/decreasein inventories (1,078) 122 (513)Decrease/(increase)in receivables 14,891 13,300 (27,786)(Decrease)/increasein payables (12,794) (5,639) 24,077-------------------------------------------------------------------------------Net movement inworking capital 1,019 7,783 (4,222) Cash generated by 23,000 24,253 55,629operationsIncome taxes paid (7,167) (5,237) (13,871)Interest paid (1,799) (137) (1,478)-------------------------------------------------------------------------------Net cash flow from continuing operating activities 14,034 18,879 40,280 ------------------------------------------------------------------------------- Net cash(outflow)/inflowfrom discontinuedoperatingactivities - (5,132) 766-------------------------------------------------------------------------------Net cash flow from operating activities 14,034 13,747 41,046 ------------------------------------------------------------------------------- Investing activitiesInterest received 576 431 702Proceeds on disposal of 553 220 301property, plant andequipmentPurchases ofintangible assets (629) (305) (1,572)Purchases ofproperty, plant andequipment (4,060) (5,583) (14,468)Acquisition ofsubsidiaryundertakings 8 (12,406) (18,268) (34,674)Disposal ofsubsidiaryundertakings - (1,342) (1,342)Net cash flow from discontinued investing activities - 669 669------------------------------------------------------------------------------- Net cash used ininvestingactivities (15,966) (24,178) (50,384)------------------------------------------------------------------------------- Financing activitiesDividends paid (8,668) (6,830) (10,688)Repayments ofborrowings - (2) (2)Repayments ofobligations underfinance leases - (30) (30)Purchase of ownshares (7,558) (7,742) (8,221)Proceeds on issue of share 960 2,859 3,510capitalIncrease in bank overdrafts 21,941 20,707 27,097-------------------------------------------------------------------------------Net cash from financing activities 6,675 8,962 11,666------------------------------------------------------------------------------- Net increase/(decrease)in cash and cashequivalents 4,743 (1,469) 2,328Cash and cash equivalents at beginning of period 17,081 14,753 14,753-------------------------------------------------------------------------------Cash and cash equivalents at end of period 21,824 13,284 17,081------------------------------------------------------------------------------- Notes to the interim financial statements 1. General Information The interim financial statements for the six months ended 30 September 2006 andsix months ended 30 September 2005, have been prepared on the basis of theaccounting policies consistent with those set out in the Group's financialstatements for the year ended 31 March 2006. The interim financial statements are unaudited and do not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985. Thestatutory accounts for the year ended 31 March 2006 have been delivered to theRegistrar of Companies. The auditor's opinion on those accounts was unqualifiedand did not contain a statement made under Section 237(2) or Section 237(3) ofthe Companies Act 1985. The interim financial statements for 2006 are unaudited,but have been reviewed by the auditors and their report to the Company is setout below. These interim financial statements were approved by the Board of Directors on 27November 2006. 2. Segmental analysis The Group was previously involved in Commercial Outsourcing. This divisionrepresented discontinued operations in the six months ended 30 September 2005.There have been no Commercial Outsourcing operations in the six months ended 30September 2006. Policy Emergency Consolidated Membership Repair 2006 2006 2006 £'000 £'000 £'000---------------------------------------------------------------------------------------------------RevenueTotal revenue 73,767 139,116 212,883Intra-segment sales - (1,551) (1,551)---------------------------------------------------------------------------------------------------- 73,767 137,565 211,332Inter-segment sales (5,357)----------------------------------------------------------------------------------------------------External sales 205,975----------------------------------------------------------------------------------------------------Intra-Group sales are charged at prevailing market prices. ResultSegment result beforejoint ventures andamortisation ofintangible assets onacquisition 13,318 4,241 17,559Share of resultsof joint ventures (268) - (268)---------------------------------------------------------------------------------------------------- 13,050 4,241 17,291Amortisation ofintangible assetson acquisition (350) (2,548) (2,898)----------------------------------------------------------------------------------------------------Operating profit 12,700 1,693 14,393Investment income 576Finance costs (1,660)----------------------------------------------------------------------------------------------------Profit before tax 13,309Tax (4,156)----------------------------------------------------------------------------------------------------Profit for the periodbeing attributable toequity holders of theparent 9,153---------------------------------------------------------------------------------------------------- Policy Emergency Commercial Discontinued Consolidated Membership Repair Outsourcing Operations 2005 2005 2005 2005 2005 £'000 £'000 £'000 £'000 £'000-----------------------------------------------------------------------------------------------------RevenueTotal revenue 62,541 93,745 2,188 (2,188) 156,286Intra-segment sales - (3,034) - - (3,034)----------------------------------------------------------------------------------------------------- 62,541 90,711 2,188 (2,188) 153,252 Inter-segment sales (3,622)-----------------------------------------------------------------------------------------------------External sales 149,630-----------------------------------------------------------------------------------------------------Intra-Group sales are charged at prevailing market prices. ResultSegment resultbefore jointventures andamortisationof intangibleassets onacquisition 10,369 2,709 - - 13,078Share of results of joint ventures - - - - ----------------------------------------------------------------------------------------------------- 10,369 2,709 - - 13,078Amortisationof intangibleassets onacquisition (97) (1,117) (1,214)----------------------------------------------------------------------------------------------------Operatingprofit 10,272 1,592 - - 11,864Investment income 431Finance costs (813)----------------------------------------------------------------------------------------------------Profit before tax 11,482Tax (3,936)----------------------------------------------------------------------------------------------------Profit for theperiod beingattributableto equityholders of theparent 7,546---------------------------------------------------------------------------------------------------- 3. Taxation The tax charge is based on the expected effective tax rate for the full year to31 March 2007 and is calculated as, 31.0% of profit before tax and amortisationof intangible assets on acquisition (six months ended 30 September 2005: 31.0%,year ended 31 March 2006: 31.0%) and 30.0% of amortisation of intangible assetson acquisition (six months ended 30 September 2005: 0.0%, year ended 31 March2006: 30.0%), including deferred tax. 4. Earnings per share Basic and diluted earnings per ordinary share have been calculated in accordancewith IAS 33 'Earnings Per Share'. Basic earnings per share is calculated bydividing the profit or loss in the financial period by the weighted averagenumber of ordinary shares in issue during the period. Adjusted earnings pershare is calculated excluding amortisation of intangible assets on acquisition.Diluted earnings per share includes the impact of dilutive share options inissue throughout the period. The underlying adjusted earnings per share has been calculated by excluding theamortisation of intangibles on acquisition. This is considered to be a betterindicator of the underlying performance of the Group. Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited)------------------------------------------------------------------------------------------Profit for 9,153 7,546 34,449the periodAmortisation of 2,898 1,214 3,658intangible assets onacquisitionTax impactarising onamortisationof intangibleassets onacquisition (869) - (1,097)-------------------------------------------------------------------------------------------Adjusted profit for the period 11,182 8,760 37,010------------------------------------------------------------------------------------------- Weighted averagenumber of shares(000's)Basic 62,259 62,520 62,474Dilutive impact of share options 2,254 1,433 1,741 -------------------------------------------------------------------------------------------Diluted 64,513 63,953 64,215------------------------------------------------------------------------------------------- Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (Unaudited) (Unaudited) (Audited) Adjusted Basic 18.0p 14.0p 59.2pAdjusted Diluted 17.3p 13.7p 57.6p 5. Dividends per share An interim dividend of 7.5p per share amounting to £4,678,000 (2005: 6.1p pershare amounting to £3,858,000) has been approved and will be paid on 3 January2007 to shareholders on the register at the close of business on 8 December2006. The ex dividend date is 6 December 2006. A final dividend in respect of the year ended 31 March 2006 was paid in theperiod of 13.9p per share amounting to £8,668,000. 6. Analysis of total net debt 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited) Bank overdraft, net of cash at bank and in hand 30,411 10,620 13,213Loan notes 14,045 2,138 3,117------------------------------------------------------------------------------------------------Net debt 44,456 12,758 16,330------------------------------------------------------------------------------------------------ 7. Reconciliation of movements in equity Share Own Share Capital Currency Share premium Merger shares incentive redemption translation Retained Total capital account reserve reserve reserve reserve reserve earnings equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000-----------------------------------------------------------------------------------------------------------------------At 1 April 2006 8,075 29,998 70,992 (16,668) 1,626 1,200 120 105,766 201,109 Totalstatement ofrecognisedincome andexpense - - - - - - (60) 9,053 8,993 Dividends paid - - - - - - - (8,668) (8,668) Issue of share 33 927 - - - - - - 960capital Purchase ofown shares - - - (7,558) - - - - (7,558) Deferred tax asset - - - - - - - 310 310on share optiongains Share based - - - - 1,541 - - - 1,541payments Share optionsexercised - - - - (178) - - 178 - Tax on exercised share options - - - - - - - 870 870----------------------------------------------------------------------------------------------------------------------At 30September 2006 8,108 30,925 70,992 (24,226) 2,989 1,200 60 107,509 197,557---------------------------------------------------------------------------------------------------------------------- 8. Acquisitions On 21 April 2006, the Group acquired certain of the trade and assets ofPilkington United Kingdom Limited relating to the glazing division of PilkingtonBuilding Products. The business undertakes glazing repairs on a nationwidebasis. On 17 August 2006, the Group acquired 20,000 Home Assistance policies fromFirstEnergy and simultaneously signed a marketing agreement with FirstEnergyCorp providing access to up to 3.4m households. Subsequent to the period end, on 26 October 2006, the Group acquired 100% of theshare capital of Digital Insurance Services Limited, a provider of homeinsurance and contents claims validation and fulfilment services. All these transactions have been accounted for by the purchase method ofaccounting. There were no fair value adjustments made to the acquisition balancesheets. The fair value of the identifiable assets and liabilities of the acquisitionswere: Acquired by: Homeserve Home Service Homeserve Assistance Ltd USA Corp Assistance Ltd Digital Insurance Pilkington FirstEnergy Total Services Ltd £'000 £'000 £'000 £'000-----------------------------------------------------------------------------------------------------Net assetsacquired:Property, plant and 130 - 130 28equipmentInventories 66 - 66 99Trade and other 2,274 - 2,274 477receivablesCash and cash - - - 1equivalentsTrade andother payables (2,007) - (2,007) (568)----------------------------------------------------------------------------------------------------- 463 - 463 37----------------------------------------------------------------------------------------------------- Intangible assets 3,965 4,014 7,979 -identified onacquisitionGoodwill 2,241 - 2,241 12,163-----------------------------------------------------------------------------------------------------Total consideration 6,669 4,014 10,683 12,200----------------------------------------------------------------------------------------------------- Satisfied by:Cash 6,500 1,890 8,390 3,000Deferred - 1,541 1,541 9,000considerationDirectly attributable costs 169 583 752 200----------------------------------------------------------------------------------------------------- 6,669 4,014 10,683 12,200----------------------------------------------------------------------------------------------------- Net cash outflowarising on acquisition:Cash 6,669 2,473 9,142 3,200considerationCash and cashequivalentsacquired - - - (1)----------------------------------------------------------------------------------------------------- 6,669 2,473 9,142 3,199----------------------------------------------------------------------------------------------------- Intangible assets on the acquisition of Pilkington represents the director'sestimate of the value of the customer relationships at acquisition. Intangibleassets identified with the FirstEnergy policy acquisition and marketingagreement represent the director's estimate of the value of the acquiredcustomer database. Goodwill represents future cross sell opportunities,efficiency savings, synergies and potential new client and customer wins fromthese acquisitions. In addition to the net cash flow arising on acquisition above of £9,142,000,deferred consideration of £2,750,000 was paid relating to the prior yearacquisitions of National Property Solutions Ltd and Homeserve Emergency ServicesLtd (formerly Highway Emergency Services Ltd). There were further cash outflows in respect of a number of individually immaterial acquisitions amounting to £514,000 resulting in £514,000 of intangible assets. If all the acquisitions had been completed on the first day of the financialperiod, there would have been no material adjustment to Group revenues andoperating profit. The post acquisition operating profit from Pilkington in thesix months ended 30 September 2006 was £219,000. There has been no operatingprofit or loss from FirstEnergy in the six months ended 30 September 2006. An exercise to determine the intangible assets included within goodwill onDigital Insurance Services Limited is yet to be undertaken. This exercise willbe completed for the annual accounts. 9. Other information This report is being sent to shareholders and further copies will be availablefrom the registered office at Cable Drive, Walsall, WS2 7BN. INDEPENDENT REVIEW REPORT TO HOMESERVE PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 September 2006 which comprise the group incomestatement, the group statement of recognised income and expense, the groupbalance sheet, the group cash flow statement and related notes 1 to 9. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2006. Deloitte & Touche LLPChartered Accountants27 November 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HSV.L