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Preliminary Results 2003. Brian Whitty Group Chief Executive.

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Presentation on theme: "Preliminary Results 2003. Brian Whitty Group Chief Executive."— Presentation transcript:

1 Preliminary Results 2003

2 Brian Whitty Group Chief Executive

3 Financial Highlights * Before goodwill and exceptional item Turnover % Operating Profit* % Profit Before Tax* % EPS*45.9p39.6p16% DPS18.0p16.1p12% Year ended 31 March, £m  %

4 Operational Highlights 2003 Operating profits up 54% in Support Services Home Service outstanding growth, operating profits up 37%, policies up 30% to 2.4 million Commercial outsourcing continues to benefit from its investment in longer term customer relationships Three significant acquisitions contributed £6.2m to operating profits South Staffordshire Water provides a steady profit stream on reduced equity base Strong cash flow, net cash generated £12m Successful placing of 40% of our shares held by Vivendi and Axa

5 Andrew Belk Group Finance Director

6 Group Profit and Loss Turnover % Operating Profit % Interest(6.0)(1.9)314% Profit Before Tax % Tax(12.8)(9.8)31% Minority Interest(2.9)(1.9)53% Earnings % EPS45.9p39.6p16% DPS18.0p16.1p12% Year ended 31 March, £m  % All figures before goodwill and exceptional item

7 Operating Profit by Division HomeServe profit before interest payable of £2.9m HomeServe % Commercial Outsourcing % Regular Water Supply % Total Operations % Year ended 31 March, £m  %

8 HomeServe Operating Profit Regency audited 11 months to 28th February 2002 £3.1m Highway audited 9 months to 31st March 2002 £2.4m Home Service % Regency (11 months)4.0-- Highway (9 months)0.7-- Total HomeServe Division % Year ended 31 March, £m  %

9 HomeServe Performance Home Service Renewals maintained at 86% Cost of acquisition reduced Successful use of outbound telesales for customer acquisition Price increases in April and September International investment increased from £0.2m to £0.7m Regency Profit growth of 29% on audited 11 months to February 2002 Loss of structural warranty sales end of final quarter had limited impact New customers including Littlewoods and Furnitureland contributed to growth Underwriting costs have remained stable Repair business increased sales by over 50% Year ended 31 March, £m  % Home Service % Regency (11 months)4.0-- Highway (9 months)0.7-- Total HomeServe Division %

10 HomeServe Performance Highway Profit £0.7m compared to £2.4m comparable 9 months Increase in costs £0.7m in order to increase operating capacity Sales volumes have reduced across insurance customer base Fall in average job values, particularly high value work, £0.6m impact Maintained conversion rates and retained capacity for growth New customers slower to win and achieve run rate sales than anticipated, no significant contribution to profits in 2002/3 Year ended 31 March, £m  % Home Service % Regency (11 months)4.0-- Highway (9 months)0.7-- Total HomeServe Division %

11 Commercial Outsourcing and Water Operating Profit Regulated Water Supply profit before interest of £4.7m Commercial outsourcing - existing % Middleton1.5-- Regulated Water Supply % Total Operations % Year ended 31 March, £m  %

12 Commercial Outsourcing Commercial Outsourcing - existing Thames sales doubled to £8m, LUL up 39% to £6.4m Growing long term accounts constrained capacity Rapid results include licence revenue of £1.0m, consistent with prior year Echo investment in developing Walsall and Exeter facilities, £0.5m Mail Solutions increased profit and improved margins Middleton Profits up 27% compared to audited 12 months to January 2002 Increased sales to Birmingham City Council Retail customer sales increasing (eg, Tesco, Argos refurbishment work) Nationwide service contracts for Doorman with financial sector customers Year ended 31 March, £m  % Commercial outsourcing - existing % Middleton1.5-- Regulated Water Supply % Total Operations %

13 Regulated Water Supply Low inflation impact on turnover Achieving targeted efficiency savings Increase in depreciation £0.4m Profits growth 2% against RPI 1% and K-1 Before interest £4.7m Year ended 31 March, £m  % Commercial outsourcing - existing % Middleton1.5-- Regulated Water Supply % Total Operations %

14 Group Cash Flow Operating Profit (pre goodwill) Depreciation and profit on disposals Increase in working capital and loss in JV(0.6)(2.0) Net cash inflow from operating activities Net interest / dividends to minority(6.0)(3.2) Taxation(13.0)(9.4) Capital expenditure(26.0)(32.0) Acquisitions(78.9)- Equity dividends paid(10.5)(9.4) Issue of shares Financing79.0(1.3) Increase / (decrease) in Cash12.2(4.4) Net Debt(103.1)(28.6) Year ended 31 March, £m

15 Capital Expenditure Regulated Water Supply - New assets Infrastructure renewals Capital contributions(4.8)(6.0) Support Services - HomeServe Commercial Outsourcing Sales Proceeds(1.0)(1.2) Investment in JV Year ended 31 March, £m £0.8m (2002:£0.3m) acquired under finance leases

16 Group Balance Sheet Fixed Assets - Tangible Goodwill Net Current Liabilities(12.1)(16.1) Deferred Consideration(26.4)- Deferred Income(18.5)(8.4) Net Debt(103.1)(28.6) Deferred Tax(8.6)(6.8) Net Assets Debt : EBITDA Interest Cover Group Interest Cover Support Services27.0n/a As at 31 March, £m

17 Group Overview - Acquisitions Servowarm acquired in March 2003 for cash consideration of £2.4m Regency £4m retention for up to 2 years and £2.7m earnout after one year Highway earnout in two tranches, March 2004 and 2006 based on significant profit growth 2004 earnout minimum £4.4m Fair Value adjustments of £466,000 Acquired 40% of Home Hotline Ltd 1st April 2002 for £1.9m Cash Consideration (incl fees) Loan notes Deferred Consideration Goodwill on Acquisition £m RegencyHighwayMiddletonOtherTotal

18 Brian Whitty Group Chief Executive

19 Home Service Policies up 30% to 2.4m, plumbing 1.73m (1.41m), electrics 0.55m (0.38m), gas and other 0.12m (0.06m) Nine years of policy growth in excess of 25% Increased market share Successful new product development - 157,000 supply pipe cross sales Successful use of telesales Acquisition of Servowarm for £2.4m complements gas heating policy business, 86,000 policies in total Direct Line Response 24 and help line performing well Joint Venture in France now has 60,000 policies Year ended 31 March, £m  % Turnover % Operating Profit %

20 Regency Profit 12 months to 31st March 2003 £4.4m compared to prior 12 months £3.2m (unaudited) 7 million policies now issued, growth of 27% since acquisition Structural warranties for Harveys replaced with optional policy –enhancement to existing extended warranty product –rolled out in March and April across all stores Further expansion of Littlewoods and Furnitureland products Potential to develop new retail accounts Sales incentive schemes operated on behalf retailers Repair business performed strongly, experiencing increased demand Appointed new Managing Director Overall retail market holding up Year ended 31 March, £m months Turnover13.0 Operating Profit4.0

21 Highway Profit 12 months to 31 March 2003 £1.4m compared to prior 12 months £2.8m (unaudited) Secured contract with Prudential in January 2003, slow start now one of largest customers (new commercial customers in year - McDonalds, Six Continents, Marks and Spencer) Operational gearing to meet expected growth Reorganising the business to react to troughs in demand –fewer principal branches to reduce cost and improve efficiency –productivity incentives –appointed Chief Executive to strengthen management team Developing plumbing and drains, rollout with a leading insurer from July 2003 Year ended 31 March, £m months Turnover30.9 Operating Profit0.7

22 Commercial Outsourcing OnSite Middleton profit 12 months to 31 March 2003 £2.2 compared to prior 12 months £1.8m (unaudited) Continued investment in long term customer relationships Regional retail customers wins include Argos and The Big Food Group Providing a national service to new financial services customers Customer Solutions Echo joint venture with South West Water implemented Rapid Rapid has a long sales and implementation cycle, no new licence fees for 2004 Mail Solutions strong customer demand and improving margins Year ended 31 March, £m  % Turnover - Commercial outsourcing - existing % - Middleton (8 months) Operating Profit - Commercial outsourcing - existing % - Middleton (8 months)1.5--

23 Water Continues to be an industry leader for operational efficiency and customer service Expect to meet OFWAT’s target reduction in opex to 2005 Second in customer service 2001/2 and improved since Preparation for 2005 periodic review Year ended 31 March, £m  % Turnover % Operating Profit %

24 Synergies Achieved With Acquisitions Regency national upholstery repair and cleaning network –household insurance market value estimated at £100m –agreement to trial with several insurers Highway and Home Hotline developed a national plumbing and drains network –household insurance market value estimated £200m –trials with a number of insurers –national rollout with leading insurer in quarter 2 Servowarm enhanced gas heating business –improved service delivery to Home Service policy holders –cross selling Home Service policies Home Hotline recently won CGNU as a client (Highway’s largest client) Middleton provided broader service range, shared and new customers Other initiatives ongoing

25 Prospects Support Services will underpin future growth Home Service will continue to develop new products and improve market penetration Regency’s priorities are to grow repair business and develop new retail warranty products Highway will improve operational efficiency and develop plumbing and drains for household insurance market Commercial outsourcing experiencing increased demand from retail and financial sectors Regulated Water Supply will continue to provide high levels of service

26 Appendices

27 Analysis of Turnover Support Services - Home Service % - Regency Highway Servowarm % Commercial outsourcing - OnSite % - Customer Solutions % - Inter-divisional sales(18.3)(20.1) % Regulated Water Supply % % Year ended 31 March, £m  %


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