28th Nov 2005 07:02
Homeserve Plc28 November 2005 HOMESERVE PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 Highlights of the Period Continuing Operations 2005 2004 Increase Revenue £149.6m £87.8m 70.3%Profit from Operations * £13.1m £11.1m 18.1%Profit before Tax * £12.7m £10.8m 17.9%Earnings per share * 14.0p 12.0p 16.7% Total Group - including discontinued operations Revenue £151.8m £121.6m 24.9%Profit from Operations £11.9m £10.4m 14.2%Earnings per share 12.1p 0.1p • Strong growth in Homeserve GB, with policies up 30% to 4.31m; • Increased investment in US operation; • Results now include Chem-Dry and Homeserve Property Repairs (previously Sergon), which are now integrated within Emergency Repair; • Homeserve Warranties impacted by continuing weakness in retail market * Excluding exceptional operating costs and amortisation of acquisitionintangibles, see income statement and notes 2 & 4. Brian Whitty, Chairman, commented; "These results represent a good balance between delivering excellent profitsgrowth and investing for the longer-term. As in prior years, profits aresignificantly weighted to the second half, reflecting the seasonal profile ofpolicy renewal and emergency repair work." 28 November 2005 Enquiries: Homeserve plcBrian 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 Homeserve plc has had an excellent first six months with continued strong ratesof growth in its policy base and increased activity from its expanded repairnetwork. Homeserve is now uniquely positioned to offer an integrated multi tradesolution for domestic emergency repairs. Interim Results Homeserve now prepares accounts in accordance with International FinancialReporting Standards. Consequently, in the results below the comparatives havebeen restated to reflect this change. In the six months ended September 2005 Homeserve's continuing operations havegenerated an increase in turnover of 70% to £149.6m (30 September 2004: £87.8m).Profit from operations* increased by 18% to £13.1m (30 September 2004: £11.1m).These results include turnover of £46.8m from Homeserve Property Repairs(previously Sergon) and Chem-Dry which were acquired in the last 12 months.Continuing profit from operations on a statutory basis increased by 21% to£11.9m (30 September 2004: £9.8m). The effective tax rate increased to 31% (30 September 2004: 30.5%). Earnings pershare* from continuing operations increased by 16.7% to 14.0p (30 September2004: 12.0p). Earnings per share on a statutory basis, including discontinuedoperations, increased to 12.1p from 0.1p. The Board has approved an interim dividend of 6.1 p (2004: 5.1p) an increase of20%, providing a dividend of £3.9m compared to £3.2m in 2004. Cash generated from operations was £24.3m including a net reduction in workingcapital of £7.8m. Net debt at 30 September amounted to £12.8m (30 September2004: £4.8m) after investment in acquisitions of £18.3m. POLICY MEMBERSHIP Turnover and profit from operations* of these businesses increased by 32% to£62.5m and 3% to £10.4m respectively. These results reflect strong growth inHomeserve GB, increased investment in our US operation and the continued poormarket conditions for furniture warranty. The total number of policies hasincreased by 37% to 4.84m over 12 months and by 15% over 6 months. Homeserve GB Our utilities branded policy business in the UK made an excellent start to theyear adding a record ever number of new policies in the first half year of664,000 (2004: 529,000). Turnover increased by 33% to £58.4m (2004: £44.0m).Total policies increased by 30% over the full twelve months and increased by 11%in the six months to 4.31m (31 March 2005: 3.88m). As at 30 September totalpolicies were: • 2.98m in plumbing and drains (31 March 2005: 2.76m) • 0.66m in electrical (31 March 2005: 0.60m) • 0.67m in other including gas supply pipe and housebuilder policies (31 March 2005: 0.52m) Both the water supply pipe and gas supply pipe policies have continued toperform well increasing by 19% and 52% to 1.0m and 0.23m respectively, in thefirst half. The number of customers increased by 26% over the last 12 months andby 6% over the last 6 months to 2.50m (31 March 2005: 2.36m). In addition, thenumber of policies per customer increased to 1.73 (31 March 2005: 1.65). The average acquisition cost per policy increased by 7% compared to the sameperiod last year reflecting additional summer marketing activity. Customerretention rates remain at the high level of 88%. We have again achieved customer satisfaction levels of 96% and have doubled theproportion of customers who rate the service as outstanding. Homeserve International In the past six months, the total number of policies has increased by 33% to419,000 (31 March 2005: 314,000) and doubled over the twelve month period (30September 2004: 211,000). Domeo, our joint venture with Veolia in France has 316,000 policies, up 13% (31March 2005: 280,000) and up 67% in 12 months, and employs 54 staff. We have nowreached agreement with Veolia to establish a claims handling joint venture inthe first quarter of 2006, replicating our model of controlling claims handlingas we do in the UK, enabling us to start offering emergency home assistance. Our business in the US is performing well with existing partners and now has95,000 policies (31 March 2005: 33,000), including the 41,000 Leak Guard policesacquired from United Water in May 2005, which we have now increased by 32% to54,000. We have strengthened our senior business development team, whichcontinues to build a pipeline of potential new water company partners and aregenerating interest from power companies. We have discontinued our Australian test where claims frequencies were threetimes expectation, and progress in signing new partners was slow. Managementresource has been transferred to the US and there are no significant closurecosts associated with ending the Australian test. Homeserve Warranties The integration of our retail warranty and manufacturer warranty businesses isprogressing well. Within manufacturer warranty we have 115,000 extended warrantypolicies (31 March 2005: 90,000), reflecting improved marketing and moreefficient use of customer data. We have also recently won Konica Minolta as acustomer within manufacturer warranty. We secured the Debenhams furniturewarranty account and developed an innovative underwritten laminate flooringproduct for Floors2Go as well as continuing to win new regional retaileraccounts. However, the difficult market conditions for retail furniture haveshown no sign of abating. EMERGENCY REPAIR Turnover and profit from operations* of these businesses increased by 131% and162% to £93.7m and £2.7m respectively. We now have a full range of emergency repair trades and are making good progressin integrating these into a single offering giving Household Insurers theability to outsource all household emergency claims to Homeserve. We are pleasedto have won a groundbreaking three year contract with Liverpool Victoria for themanagement of all of their building claims across four of our trades. Thecontract is estimated to double our turnover with this customer to £66m over thenext three years, and demonstrates our unique ability to enable householdinsurers to fully outsource all of their claims repairs. Homeserve Glass, Locks, Plumbing and Drains This business has delivered an excellent performance in the first half. Turnoverincreased by 17% to £30.8m (30 September 2004: £26.2m) and the business is nowbenefiting from the operational improvements made last year. Fitter Package, ourengineer incentive scheme, is operational in 10 of our 37 glazing and locksbranches demonstrating that significant increases in productivity areachievable. This will be extended to include the remaining branches and plumbingand drains over the second half of the financial year. The conversion of leads to invoiced sales, a key productivity measure, hasincreased to 88% (31 March 2005: 85%), which together with the operationalbenefits associated with improved workflow management and successfulimplementation of the new IT system, has compensated for the continued reductionin claims volumes experienced across the market. Homeserve Property Repairs Turnover in the first six months was £24.4m. During the first half we havestrengthened the senior management team, significantly reduced average repairtimes from 78 days at acquisition (31 March 2005: 61 Days) to a market leadingperformance of 37 days, improved customer service, and completed a move tolarger premises in August 2005. This has positioned the business to meet theexpected increase in volumes from household insurers in the second halffollowing new account wins and increased run rates from existing customers. Chem-Dry Chem-Dry delivered an excellent result in the five months following acquisition,contributing turnover of £22.4m. The directly employed carpet and upholsterycleaning operation previously within the Warranty business was transferred toChem-Dry in August and will benefit from the scale of this existing operation.In addition 42 sub contract cleaners previously working for the Warrantybusiness have bought Chem-Dry franchise licences. Prospects Our Policy Membership business in the UK is expected to continue to seesignificant policy and profits growth in the second half, its busiest period ofthe year. Internationally, we expect the increased resources in the US to bereflected in signing new affinity partners and we expect to launch initial testmarketing in one new European country. Our Emergency Repair businesses are well positioned to benefit from the recentnew customer wins and volume increases during the seasonally 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 WhittyExecutive Chairman 28 November 2005 * before exceptional operating costs and amortisation of acquisition intangibles- see income statement and notes 2 & 4. GROUP INCOME STATEMENTFor the six months ended 30 September 2005 Six months Six months Year ended ended ended 31 March 30 September 30 September 2005 2005 2004 Notes £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited) Continuing Operations Revenue 2 149,630 87,837 220,711Operating costs(excludingexceptionaloperating costs#) (136,552) (76,765) (178,472)-------------------------------------------------------------------------------- Profit fromoperations beforeexceptionaloperating costs#and amortisation ofintangible assetson acquisition 2 13,078 11,072 42,239 Amortisation ofintangible assetson acquisition (1,214) (53) (310)Exceptionaloperating costs# 9 - (1,207) (2,787)------------------------------------------------------------------------------- Profit fromoperations 2 11,864 9,812 39,142 Investment income 431 154 536Finance costs (813) (456) (856)------------------------------------------------------------------------------- Profit before tax,exceptional operating costs#and amortisation ofintangible assets onacquisition Continuing Operations 12,696 10,770 41,919Amortisation ofintangible assetson acquisition (1,214) (53) (310)Exceptionaloperating costs# - (1,207) (2,787)-------------------------------------------------------------------------------- Profit before tax 11,482 9,510 38,822Tax 3 (3,936) (2,912) (11,818)-------------------------------------------------------------------------------- Profit for the period from 7,546 6,598 27,004continuing operations Discontinued OperationsLoss for the periodfrom discontinuedoperations 2 - (6,548) (19,803)-------------------------------------------------------------------------------- Profit for the period 7,546 50 7,201------------------------------------------------------------------------------- Attributable to:Equity holders of the parent 7,546 50 7,201 ------------------------------------------------------------------------------- 7,546 50 7,201------------------------------------------------------------------------------- Dividends per share 5 6.1p 5.1p 16.0p Earnings per share 4From continuing operationsBasic 12.1p 10.6p 43.5pDiluted 11.8p 10.5p 42.7p From continuing anddiscontinued operationsBasic 12.1p 0.1p 11.6pDiluted 11.8p 0.1p 11.4p # Relates to exceptional bad debt charge in the prior year as detailed in note 9 GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the six months ended 30 September 2005 Six months Six months Year ended ended ended 31 March 30 September 30 September 2005 2005 2004 Notes £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited)Exchangedifferences ontranslation offoreign operations 7 117 - - Actuarial losses ondefined benefitpension schemes 7 (850) (108) (158) Deferred tax takendirectly to equityon share basedschemes - (339) 530 Tax on items takendirectly to equity 7 255 32 47------------------------------------------------------------------------------- Net(expense)/incomerecognised directlyin equity (478) (415) 419 Profit for the period 7,546 50 7,201------------------------------------------------------------------------------- Total recognisedincome and expensefor the period 7,068 (365) 7,620------------------------------------------------------------------------------- Attributable to:Equity holders ofthe parent 7,068 (365) 7,620-------------------------------------------------------------------------------- 7,068 (365) 7,620-------------------------------------------------------------------------------- GROUP BALANCE SHEETAs at 30 September 2005 30 September 30 September 31 March 2005 2004 2005 Notes £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited)Non-current assetsGoodwill 165,945 150,511 159,262Other intangible assets 20,451 3,600 7,661Property, plant and equipment 25,243 20,113 18,717Interests in joint ventures 864 - 864Deferred tax asset 736 - 613-------------------------------------------------------------------------------- 213,239 174,224 187,117-------------------------------------------------------------------------------- Current assetsInventories 2,318 2,048 1,985Trade and other receivables 86,240 64,907 88,556Cash and cash equivalents 13,284 10,011 14,753-------------------------------------------------------------------------------- 101,842 76,966 105,294--------------------------------------------------------------------------------Non-current assets classified as held for sale - 34,458 --------------------------------------------------------------------------------- Total assets 315,081 285,648 292,411-------------------------------------------------------------------------------- Current liabilitiesTrade and other payables (91,256) (62,717) (80,911)Tax liabilities (7,689) (5,140) (8,990)Obligations under finance leases - (560) (30)Bank overdrafts and loans (26,042) (13,872) (3,507)--------------------------------------------------------------------------------- (124,987) (82,289) (93,438)---------------------------------------------------------------------------------Net current (liabilities)/assets (23,145) (5,323) 11,856-------------------------------------------------------------------------------- Non-current liabilitiesOther financial liabilities (13,574) (17,750) (19,530)Retirement benefit obligation (3,428) (2,528) (2,578)Deferred tax liabilities - (430) -Obligations under finance leases - (801) ---------------------------------------------------------------------------------- (17,002) (21,509) (22,108)---------------------------------------------------------------------------------Liabilities directly associatedwith non-current assetsclassified as held for sale - (13,936) ----------------------------------------------------------------------------------Total liabilities (141,989) (117,734) (115,546)---------------------------------------------------------------------------------Net assets 173,092 167,914 176,865--------------------------------------------------------------------------------- EquityShare capital 8,062 7,887 7,987Share premium 29,360 23,036 26,576Merger reserve 70,992 70,992 70,992Capital redemption reserve 1,200 1,200 1,200Share incentive reserve 2,072 608 1,200Own shares reserve (16,189) (7,973) (8,447)Currency translation reserve 117 - -Retained earnings 77,478 72,164 77,357--------------------------------------------------------------------------------Equity attributable to equityholders of the parent 7 173,092 167,914 176,865--------------------------------------------------------------------------------Total equity 173,092 167,914 176,865-------------------------------------------------------------------------------- GROUP CASH FLOW STATEMENTFor the six months ended 30 September 2005 Notes Six months Six months Year ended ended ended 31 March 30 September 30 September 2005 2005 2004 £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited) Profit from operations 11,864 9,812 39,142Depreciation 1,754 1,878 3,732Loss on disposal of property, 47 - 384plant and equipmentAmortisation of intangible 1,214 53 310assets on acquisitionAmortisation of other 719 437 1,007intangible assetsShare based payments 872 372 964expenseExceptional operating costs - bad debt charge - 1,207 2,787------------------------------------------------------------------------------- Operating cash flows before 16,470 13,759 48,326movements in workingcapital Decrease/(increase)in inventories 122 20 (796)Decrease/(increase)in receivables 13,300 670 (17,827)(Decrease)/increasein payables (5,639) 3,461 13,220--------------------------------------------------------------------------------Net movement inworking capital 7,783 4,151 (5,403) Cash generated by 24,253 17,910 42,923operationsIncome taxes paid (5,237) (4,889) (10,247)Interest paid (137) (365) (386)--------------------------------------------------------------------------------Net cash flow from continuing 18,879 12,656 32,290operating activitiesNet cash flow fromdiscontinuedoperatingactivities (5,132) (1,479) (776)--------------------------------------------------------------------------------Net cash from operating activities 13,747 11,177 31,514 -------------------------------------------------------------------------------- Investing activitiesInterest received 431 154 536Proceeds on disposal of 220 98 458property, plant andequipmentPurchases ofintangible assets (305) (655) (2,161)Purchases ofproperty, plant andequipment (5,583) (4,036) (6,086)Acquisition ofinvestment in ajoint venture - - (864)Acquisition ofsubsidiaryundertakings 8 (18,268) (4,943) (19,389)Disposal ofsubsidiaryundertakings (1,342) 10,368 19,031Net cash flow fromdiscontinuedinvestingactivities 669 (756) (1,084)--------------------------------------------------------------------------------Net cash (usedin)/from investingactivities (24,178) 230 (9,559)-------------------------------------------------------------------------------- Financing activitiesDividends paid (6,830) (5,063) (9,318)Share capital issued 2,859 2,804 7,744Purchase of ownshares (7,742) (7,973) (8,447)Repayments ofborrowings (2) (89) (1,180)Repayments ofobligations underfinance leases (30) (48) (335)Increase/(decrease)in bank overdrafts 20,707 439 (5,082)Net cash flow fromdiscontinuedfinancing activities - (1,522) (1,081)--------------------------------------------------------------------------------Net cash from/(usedin) financingactivities 8,962 (11,452) (17,699)-------------------------------------------------------------------------------- Net(decrease)/increasein cash and cashequivalents (1,469) (45) 4,256 Cash and cash equivalents at beginning of period 14,753 10,497 10,497 --------------------------------------------------------------------------------Cash and cash equivalents at end of period 13,284 10,452 14,753------------------------------------------------------------------------------- Notes to the interim financial statements 1. General Information The basis of preparation and accounting policies are set out in 'Transition toInternational Financial Reporting Standards (IFRS)', a separate announcementissued by the Group today and is available on our website at www.homeserve.com. The accounting policies used in the interim financial statements are consistentwith those that the Directors intend to use in the annual financial statements,but some changes to these policies may be necessary as a result of thosestandards yet to be endorsed by the European Commission. 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 2005, which were prepared underUnited Kingdom Generally Accepted Accounting Principles (UK GAAP), have beendelivered to the Registrar of Companies. The auditor's opinion on those accountswas unqualified and did not contain a statement made under Section 237(2) orSection 237(3) of the Companies Act 1985. The interim financial statements for2005 are unaudited, but have been reviewed by the auditors and their report tothe company is set out below. The interim financial information in respect of2004 is unaudited and has not been reviewed by the auditors. These interim financial statements were approved by the Board of Directors on 28November 2005. 2. Segmental analysis The segments disclosed below differ from those disclosed in the Group's mostrecent set of interim financial statements published for the period endedSeptember 2004. Those statements were prepared under UK GAAP and are required tobe restated to meet the disclosure requirements of IAS 14 - Segmental Reporting.These requirements mean that the Group will now report two continuing divisions,Policy Membership and Emergency Repair. However, no restatement of segmentsarises under the transition to IFRS as Policy Membership and Emergency Repairwere the only components of the previously reported segment, 'HomeserveDomestic'. The Group was also previously involved in Commercial Outsourcing. This divisionis included as discontinued operations in all periods presented under both UKGAAP and IFRS. Analysis of segment revenue Total Policy Emergency Continuing Discontinued Membership Repair Eliminations Operations Operations Consolidated £'000 £'000 £'000 £'000 £'000 £'000Six months ended30 September2005External sales 62,541 93,745 (3,622) 152,664 2,188 154,852Inter-segment sales - (3,034) - (3,034) - (3,034)------------------------------------------------------------------------------------------------------------------- Total revenue 62,541 90,711 (3,622) 149,630 2,188 151,818=================================================================================================================== Six months ended30 September2004External sales 47,411 40,545 (119) 87,837 33,715 121,552Inter-segment sales - - - - - --------------------------------------------------------------------------------------------------------------------Total revenue 47,411 40,545 (119) 87,837 33,715 121,552=================================================================================================================== Analysis of segment result Six months ended30 September2005 Profit fromoperationsbeforeamortisationof intangibleassets onacquisition 10,369 2,709 - 13,078 - 13,078 Amortisationof intangibleassets onacquisition (97) (1,117) - (1,214) - (1,214)--------------------------------------------------------------------------------------------------------------------Total result 10,272 1,592 - 11,864 - 11,864==================================================================================================================== Six months ended30 September2004 Profit fromoperationsbeforeexceptionaloperatingcosts andamortisationof intangibleassets onacquisition 10,039 1,033 - 11,072 577 11,649 Amortisationof intangibleassets onacquisition (53) - - (53) - (53) Exceptionaloperatingcosts (note 9) (1,207) - - (1,207) - (1,207)--------------------------------------------------------------------------------------------------------------------Total result 8,779 1,033 - 9,812 577 10,389==================================================================================================================== Included within the results for discontinued operations in the priorperiod are the following items: Six months ended 30 September 2004 (Unaudited) £'000Profit fromoperations 577Finance costs (52)Loss ondisposal ofsubsidiaryundertaking (6,892)--------------------------------------------------------------------------------------------------------------------Loss beforetax (6,367)--------------------------------------------------------------------------------------------------------------------Tax (181)--------------------------------------------------------------------------------------------------------------------Loss for theperiod fromdiscontinuedoperations (6,548)-------------------------------------------------------------------------------------------------------------------- 3. Taxation The tax charge is based on the estimated effective tax rate, calculated onprofit before amortisation of intangible assets on acquisition for the full yearto 31 March 2006 of 31.0% (six months ended 30 September 2004: 30.5%, year ended31 March 2005: 30.2%), 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 for 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 acquisitionand exceptional operating costs (note 9). Diluted earnings per share includesthe impact of dilutive share options in issue throughout the period. The underlying adjusted earnings per share has been calculated by excluding theamortisation of intangible assets on acquisition and exceptional operatingcosts. This is considered to be a better indicator of the underlying performanceof the Group. Six months Six months Year ended ended ended 31 March 30 September 30 September 2005 2005 2004 Continuing Continuing Continuing Operations Total Operations Total Operations Total £'000 £'000 £'000 £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited) Profit for the 7,546 7,546 6,598 50 27,004 7,201periodAmortisation of intangible 1,214 1,214 53 53 310 310assets on acquisitionExceptional operating costs - - - 1,207 1,207 2,787 2,787bad debt changeLoss on disposal of - - - 6,892 - 21,005discontinued operationsTax impactarising onexceptionaloperatingcosts andamortisation - - (391) (391) (836) (836)------------------------------------------------------------------------------------------------------------------- Adjusted profit for the period 8,760 8,760 7,467 7,811 29,265 30,467------------------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) (Audited)Weighted average number ofshares (000's)Basic 62,520 62,032 62,062Dilutive impact of share 1,433 978 1,175optionsDiluted 63,953 63,010 63,237------------------------------------------------------------------------------------------------------------------- Six months Six months Year ended ended ended 31 March 30 September 30 September 2005 2005 2004 (Unaudited) (Unaudited) (Audited)From continuingoperations Adjusted Basic 14.0p 12.0p 47.2pAdjustedDiluted 13.7p 11.9p 46.3p From continuing and discontinuedoperations Adjusted Basic 14.0p 12.6p 49.1pAdjustedDiluted 13.7p 12.4p 48.2p The basic loss per share from discontinued operations for the current period is nil (six months ended 30 September2004: 10.5p, year ended 31 March 2005: 31.9p). 5. Dividends per share An interim dividend of 6.1p per share amounting to £3,858,000 (2004: 5.1p pershare amounting to £3,203,000) has been approved and will be paid on 3 January2006 to shareholders on the register at the close of business on 7 December2005. 6. Analysis of total net (debt)/funds 30 September 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 (Unaudited) (Unaudited) (Audited) Bank overdraft,net of cash atbank and cashequivalents (10,620) 1,734 11,556Obligations underfinance leases - (1,361) (30)Loan notes (2,138) (5,154) (310)-------------------------------------------------------------------------------------------------Net (debt)/funds (12,758) (4,781) 11,216------------------------------------------------------------------------------------------------- Capital Share Own Currency Share Share Merger redemption incentive shares translation Retained Total capital premium reserve reserve reserve reserve reserve earnings equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 April2005 7,987 26,576 70,992 1,200 1,200 (8,447) - 77,357 176,865Profit for the - - - - - - - 7,546 7,546periodDividends paid - - - - - - - (6,830) (6,830)Issue of share 75 2,784 - - - - - - 2,859capitalActuariallosses ondefinedbenefitpensionschemes - - - - - - - (850) (850)Purchase ofown shares - - - - - (7,742) - - (7,742)Exchange - - - - - - 117 - 117differences ontranslation offoreignoperationsShare based - - - - 872 - - - 872paymentsTax on items taken directly to equity - - - - - - - 255 255---------------------------------------------------------------------------------------------------------------------- At 30September 2005 8,602 29,360 70,992 1,200 2,072 (16,189) 117 77,478 173,092----------------------------------------------------------------------------------------------------------------------- 8. Acquisitions On 14 April 2005, the Group acquired Chem-Dry in the UK for cash considerationof £18.7 million. Chem-Dry is a group of companies involved in fire and floodrestoration and upholstery cleaning. On 19 May 2005, the Group acquired a number of policies in the USA through theacquisition of LeakGuard Inc. On 2 August 2005, the Group acquired 100% of the share capital of NationalProperty Solutions Limited (NPS Ltd), a company which manages insured homeassistance policies. All these transaction have been accounted for by the purchase method ofaccounting. The fair value of the identifiable assets and liabilities of the acquisitionswere: Date acquired: 14 April 2005 19 May 2005 2 August 2005 Acquired by: Homeserve Home Service Homeserve GB Assistance Ltd USA Corp Ltd £'000 £'000 £'000 £'000 Chem-Dry LeakGuard Inc NPS Ltd TotalNet assetsacquiredProperty, plant and 2,341 - 1,178 3,519equipmentIntangible 2,996 - - 2,996assetsInventories 455 - - 455Trade and other 7,938 - 569 8,507receivablesCash and cash 2,638 19 - 2,657equivalentsTrade andother payables (11,527) (16) (2,091) (13,634)-------------------------------------------------------------------------------------------------------- 4,841 3 (344) 4,500 Intangible assets 10,157 1,265 - 11,422identified onacquisitionGoodwill 3,740 - 2,770 6,510--------------------------------------------------------------------------------------------------------Total consideration 18,738 1,268 2,426 22,432======================================================================================================== Satisfied by:Cash 18,438 1,136 552 20,126Loan notes - - 1,830 1,830Directly attributable costs 300 132 44 476-------------------------------------------------------------------------------------------------------- 18,738 1,268 2,426 22,432 ======================================================================================================= Net cash outflowarising on acquisition: Cash 18,738 1,268 596 20,602considerationCash and cashequivalentsacquired (2,638) (19) - (2,657)--------------------------------------------------------------------------------------------------------- 16,100 1,249 596 17,945========================================================================================================= The value of the loan note payable on the acquisition of NPS Ltd is stillsubject to final agreement and has been included as an estimate. An exercise todetermine intangible assets included within goodwill on NPS Ltd is yet to beundertaken, this exercise will be completed for the full year financialstatements. In addition to the acquisition cash flows identified in the table above,deferred consideration of £323,000 was paid relating to the prior yearacquisition of Principal Choice. This increased the level of goodwill on thisacquisition by £173,000. 9. Exceptional operating costs The exceptional operating costs in the prior periods of £1,207,000 and£2,787,000 relate to provisions made against amounts owing from Courts plc at 30September 2004 and at 31 March 2005 respectively. 10. 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 2005 which comprises the group incomestatement, the group statement of recognised income and expense, the groupbalance sheet, the group cash flow statement and related notes 1 to 10. 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. International Financial Reporting Standards As disclosed in note 1, the next annual financial statements of the group willbe prepared in accordance with International Financial Reporting Standards asadopted for use in the EU. Accordingly, the interim report has been prepared inaccordance with the recognition and measurement criteria of IFRS and thedisclosure requirements of the Listing Rules. The accounting policies areconsistent with those that the directors intend to use in the annual financialstatements. There is, however, a possibility that the directors may determinethat some changes to these policies are necessary when preparing the full annualfinancial statements for the first time in accordance with IFRSs as adopted foruse in the EU. 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. No review is performed of the comparative financial information for the sixmonths to 30 September 2004. 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 2005. Deloitte & Touche LLPChartered AccountantsFour BrindleyplaceBirminghamB1 2HZ 28 November 2005 Notes: A review does not provide assurance on the maintenance and integrity ofthe website, including controls used to achieve this, and in particular onwhether any changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the directors but no controlprocedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination offinancial information differs from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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