Pre-Close Trading Statement
Strong momentum in the business, performance at the upper end of market expectations
HomeServe plc, the international home repair and improvements business, today publishes the following trading update in respect of its financial year ended 31 March 2017.
The Group has had a very good year and expects to report results at the upper end of market expectations1 for the year to 31 March 2017.
We now offer our products to over 100m affinity partner households and have 7.8m customers. We have also made very good progress advancing our strategic priorities during the year:
§ Rapid progress in the USA with 50m affinity partner households and 3m customers at the year end.
§ Successful integration of Utility Service Partners (USP), on track to deliver $15m EBITDA in FY18.
§ New partnerships signed with Aviva in the UK and Edison Energia in Italy.
§ Accelerated our online consumer proposition with investments in Checkatrade (UK) and Habitissimo (Spain).
§ Innovation and new country expansion making good progress.
Richard Harpin, Chief Executive, HomeServe plc, commented:
"I am delighted with our performance this year. Given the strength of our strategic and operational progress, we anticipate delivering a performance at the upper end of expectations for the year ended 31 March 2017. This progress, combined with excellent prospects in all our businesses will provide the platform for further strong growth next year."
The UK business has had another good year with customer growth of 1%.
In February, we expanded our partnership with Aviva, the UK's largest general insurer. We jointly launched Aviva Response, a new range of products, powered by HomeServe and sold through Aviva's marketing channels, offering cover for heating, plumbing, electrics and security.
Aviva continues to be a key partner for the testing and roll out of LeakBot, our smart water leak detector. We have also commenced pilots with other insurers, most recently with RSA and its More Than brand. Results continue to be encouraging and support our focus on innovation.
In line with regulatory changes announced last year, which affect all of the general insurance industry, we will provide additional disclosures for all policy renewals after 1 April 2017. We already provide enhanced disclosures to our customers with regards to pricing and do not anticipate that these new requirements will have any material impact on our retention performance.
Retention remains strong at 80% and we continue to see high income per customer. We anticipate income per customer increasing further next year as customers purchase more comprehensive cover and receive the benefits of more usage.
Going forward we expect our focus on new partnerships, technology, innovation and efficiency to provide the opportunity for continued growth.
Over the past 12 months, we have achieved significant expansion in respect of partner households in the USA, making excellent progress towards the long-term target of 80m partner households we announced at our Capital Markets Day back in June, ending the year at 50m households.
We ended the financial year with 3m customers, representing another significant milestone and up 28% compared to FY16. Retention remains strong at around 82%.
We have continued to invest in marketing and business development to deliver further growth, while our investments in technology are driving operational efficiencies and enhancing the customer experience. These improvements, combined with the higher customer numbers are expected to deliver a significant increase in operating profit in FY17.
The USP business integration is progressing to plan with marketing responses as we anticipated. As previously announced, we expect USP to be earnings neutral in FY17 and deliver $15m EBITDA in FY18, the first full year of ownership.
Our business in France continues to deliver customer growth through partnerships with Veolia and Suez (formerly Lyonnaise Des Eaux) and customer numbers were over 1m at the year end. We continue to see very good levels of retention at 89%, in line with the prior year.
Our Spanish business continues to deliver good customer growth. Customer numbers at the year end are 1.3m, up from 1.2m in the prior year. This customer growth combined with continued good performance in the claims handling business is expected to deliver ongoing profit progression.
During March, we established a joint venture with Edison Energia, Italy's third largest energy supplier and a member of the EDF Group. Edison has acquired 51% of our Italian business and we will retain a 49% share. We have commenced marketing a range of home assistance products, principally through Edison's sales channels.
We have proven that our business model is successful internationally and we continue to progress our international development plans.
Our acquisition of significant shareholdings in Checkatrade and Habitissimo in December and January has enabled us to accelerate our plan to help consumers looking for a single online source to solve home emergencies, repairs and improvements using a digital platform and mobile apps to offer a compelling on demand home improvement and repair service for consumers and local Home Experts.
This is a significant market, where Checkatrade and Habitissimo combined have 45,000 local Home Experts carrying out an estimated £3.5 billion of home repairs and improvements annually.
As previously indicated, we invested around £6m in our New Markets segment in FY17.
HomeServe is scheduled to announce its preliminary annual results on 23 May 2017.
A conference call for analysts and investors will take place at 08:30 this morning. The conference call can be accessed by dialling +44 (0) 20 3139 4830 and pin code 50971758#.
Richard Harpin, Group Chief Executive
David Bower, Chief Financial Officer
Linda Hardy, Finance Director Tel: 01922 427 997
Martin Robinson Tel: 0207 353 4200
1. The range of analyst forecasts for adjusted PBT for the year ended 31 March 2017 is £105m - £112m, based on forecasts as at 5 April 2017. The average of these is £110.5m.
2. This announcement contains certain forward looking statements, which have been made in good faith, with respect to the financial condition, results of operations, and businesses of HomeServe plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast.