Annual Report
& Accounts 2021
Making home repairs and improvements easy
Easy for homeowners
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Easy for trades
Our purpose is to make
home repairs and
improvements easy.
Easy for homeowners
and easy for trades.
Membership customers buy a policy to cover
them for home repairs, principally plumbing,
heating and electrics.
In HVAC (Heating, Ventilation and Air
Conditioning), we do installations and
replacements as well as repairs.
In Home Experts, our online platforms match
consumers with local trades (tradespeople) for
all home repairs and improvements.
Our vision is to
be the world’s
largest, most
trusted provider of
home repairs and
improvements.
READ ONLINE
To view this report online, go to
homeserveplc.com
We employ over 7,400 people worldwide,
to serve our customers in the US, Canada,
UK, France, Belgium, Spain, Portugal and
Japan. The HomeServe Way is to operate
with courage, persistence and integrity in
the service of our customers.
Best
Workplaces™
FRANCE
2021
Best
Workplaces™
ESPAÑA
2021
HomeServe plc Annual Report & Accounts 2021
Strategic report
Highlights
1
GROUP PERFORMANCE HIGHLIGHTS
Revenue
£1,304.7m
15% from £1,132.3m
Statutory operating profit
£71.8m*
55% from £158.6m
Basic earnings per share
Ordinary dividend per share
9.3p*
71% from 31.7p
26.0p
10% from 23.6p
* Exceptional charge of £92.4m, mainly reflecting decision to fully impair UK eServe system investment.
CONTENTS
Strategic report
At a glance
Chairman’s statement
Chief Executive’s review
Market overview
Business model and strategy
Key performance indicators
Responsible business
Principal risk and uncertainties
Operating review
Financial review
Section 172(1) statement
Viability statement
Going concern
Non-financial information statement
Governance
Corporate governance statement
Chairman’s overview
Compliance and other statements
Board leadership and company purpose
Division of responsibilities
Composition, succession and evaluation
Board of Directors
Executive Team
Nomination Committee report
People Committee report
Audit, risk and internal control
Audit & Risk Committee report
Directors’ remuneration report
Remuneration at a glance
Annual statement
Directors’ remuneration policy
Annual report on remuneration
Directors’ report
Statements of responsibilities
Independent Auditor’s report
Financial statements
Group financial statements
Company financial statements
Glossary
2
4
6
10
12
18
20
32
38
48
52
54
55
56
58
60
63
67
71
71
73
76
79
81
84
92
93
97
105
119
122
124
136
188
209
During the COVID pandemic,
our homes became more
important to us than ever.
Demand for our products and
services increased. All of our
businesses performed well,
thanks to our dedicated staff,
contractors and partners.
We now have 8.4m
Membership customers and
a network of 64k trades.
HomeServe uses a number of alternative performance measures (APMs) to assess the performance of the Group and its individual segments. These are used in headline financial
results and throughout the Strategic report. APMs are non-GAAP measures which address profitability, leverage and liquidity and together with operational Key performance indicators
give an indication of the current health and future prospects of the Group. Definitions of APMs and the rationale for their usage are included in the Glossary at the end of this report with
reconciliations, where applicable, back to the equivalent statutory measure. The key APMs used in the strategic report are adjusted operating profit and adjusted profit before tax.
2
Strategic report
At a glance `
HomeServe plc Annual Report & Accounts 2021
At a glance
Our purpose is to make home repairs and improvements easy, and our vision is to
be the world’s largest, most trusted provider of home repairs and improvements.
Although our operations are highly federated to respond to the needs of the geographies they serve, we share innovation and
best practice across the Group. Membership and HVAC are managed closely together because of the many links between
them. By offering Membership, HVAC and Home Experts, we can work towards our ambition of doing every job, in every
home. We are creating a large network of skilled trades, and are committed to helping our trades make a good living, whether
they are self-employed or part of our workforce. We make home repairs and improvements easy, for homeowners and trades.
Membership
For homeowners, the
peace of mind of a policy,
of knowing they have one
number to call if they need
assistance with plumbing,
heating, electrics, locks,
glazing, pest control and
technology.
Our Membership
business proved resilient
during lockdown, and
customer service levels
remained high. We
continued to grow our
global customer base,
particularly in North
America.
Customers
8.4m
1% from 8.3m
Retention rate
83%
1ppt from 82%
See page 12
4.7m
1.6m
1.2m
0.9m
–
North
America
UK
France
Spain
New
Markets
85%
North
America
78%
UK
88%
83%
–
France
Spain
New
Markets
HVAC (Heating, Ventilation and Air Conditioning)
See page 12
The capability to install
and replace units, as well
as service and repair them,
so that we can provide
a complete service to
homeowners.
Every home has some
form of heating and/or
an air conditioning unit.
We are creating an HVAC
installations capability
in all of our established
Membership markets
through our buy-and-
build strategy, which will
enable us to sell more
policies and operate
more efficiently.
Home Experts
An online marketplace to
help homeowners find
local trades (tradespeople)
on demand, to help with a
broad range of home repairs
and improvements, from
landscape gardening to
carpet cleaning.
The pandemic
accelerated the
consumer demand to
find trades online. This
benefited our Home
Experts businesses,
which saw record
levels of consumer
engagement.
Acquisitions
24
from 15
Installations
revenue £m
£101.6m
26% from £80.9m
Web visits
118.0m
6% from 110.9m
Revenue £m
£139.8m
95% from £71.8m 1
7
North
America
1
UK
10
6
France
Spain
57.9
North
America
12.1
UK
16.0
France
15.6
Spain
See page 12
29.0
89.0
Checkatrade
Habitissimo
39.0
91.3
9.6
Checkatrade eLocal
Habitissimo
In FY21, we have made significant progress on doing business responsibly, setting new environmental targets and
supporting our workforce and contractor networks in tough times during the pandemic.
See page 20.
1 eLocal FY20 revenue (£22.1m) reflected only four months trading contribution to the Home Experts total.
100%
1%
3%
0%
7%
15%
10%
25%
39%
11%
5%
21%
40%
114%
(26%)
(29%)
(12%)
Strategic report
At a glance
3
North America
UK
France
Spain
Checkatrade
eLocal
Habitissimo & France
8%
17%
34%
49%
6%
(7%)
(3%)
Operating
profit
Operating
Loss
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C
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P
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Revenue
£1,304.7m
15% from £1,132.3m
Statutory operating profit/(loss)
Adjusted operating profit
£71.8m
55% from £158.6m
£214.3m
6% from £201.7m
We run our Membership & HVAC businesses by geography with established operations in North America, UK, France and
Spain, an early stage joint venture in Japan and expansion underway into Belgium and Portugal. In March 2021, we arranged
our businesses into three different divisions which are at different stages of development. Each division reports to one of our
Executive Directors, to ensure that each gets the focus and attention it deserves. Tom Rusin runs Membership & HVAC – North
America; Ross Clemmow is responsible for Membership & HVAC – EMEA; and Richard Harpin oversees Home Experts.
See page 71 for executive biographies.
MEMBERSHIP &
HVAC – NORTH
AMERICA
1
Proven track record in an under-penetrated market; strongest
near-term growth potential
Our largest and fastest growing Membership business is driving the Group’s near term
growth and has potential to keep expanding. North America also has the Group’s most
established HVAC business and in FY21 acquired a further 7 businesses to support our
buy-and-build strategy.
See page 14
MEMBERSHIP &
HVAC – EMEA
Established, cash-generative businesses in the UK, France and Spain
with routes to future growth; new market in Japan
2
The UK is our most established Membership business. Although customer numbers are
currently declining, we have opportunities to grow by opening up new channels such as
energy partnerships and direct to consumer, and by harnessing technology like intelligent
call routing to revolutionise customer service.
See page 15.
France is a well-established Membership business with the highest customer retention
rates and operating margins in the Group. FY21 saw the most new customers ever, thanks
to strong partnerships with large water companies and new relationships with online
aggregators. We will expand from France into Belgium in FY22, in partnership with Eneco
Belgium.
See page 15.
In Spain, since the end of our partnership with Endesa in 2018, our business has diversified
successfully. We still service the Membership customers we recruited with Endesa, and also
have growing HVAC and Claims businesses, the latter servicing a growing number of B2B
bancassurer partners. We plan to expand from Spain into Portugal in FY22.
See page 15.
In Japan, our joint venture with Mitsubishi Corporation is making good progress, with our
first two utility partnerships and over 17,000 customers now in place.
See page 15.
HOME
EXPERTS
3
Our most exciting medium to long-term growth opportunity
We are investing to build an innovative business model, through Checkatrade in the UK,
Habitissimo in Spain and eLocal in North America.
Our Home Experts businesses are expected to deliver their first combined profit in FY22.
See page 16.
HomeServe plc Annual Report & Accounts 2021
4 Strategic report
Chairman’s statement
Chairman’s statement
“Throughout my career, I have always
stuck to the simple principle that if we
look after our people, our people will look
after our customers. Never has this been
more important than during the COVID
pandemic.“
JM BARRY GIBSON
This statement marks the end of my tenure as Chairman of
HomeServe, so I want to start my review by paying tribute
to the talented people I have had the privilege to work with
during my 17 years on the Board. HomeServe is a company
with big ambitions that attracts great people – not least
because of the force of nature that is Richard Harpin, our
exceptionally talented Founder and Chief Executive. I have
thoroughly enjoyed working with Richard, the Board and
everyone at HomeServe, and am reminded every day that
our core values of courage, persistence and integrity really
do permeate our business.
HomeServe has done the right thing by our people
throughout this pandemic-dominated year, ensuring
that our office-based staff were able to work from home
comfortably and productively, that our engineers were
safe and well-supported as they visited customers’ houses,
not furloughing anyone or making people redundant as a
result of the pandemic. We used our in-house engineering
capacity well in the UK while we were only allowed to
do emergency jobs, and are very proud of the 3,000 free
emergency jobs we did for key workers. Our care for
our people paid dividends. As at March 2021, employee
engagement exceeded pre-pandemic levels.
People strategy has been a key topic for the Board this
year – making sure we have the right people in all of our
key seats. It is a pleasure to welcome to the Board Ross
Clemmow in the new role of CEO, EMEA, and also new
Non-Executive Director Roisin Donnelly, who brings 30
years of marketing and advisory experience. We ended the
year one appointment away from reaching the Hampton
Alexander target of one third female Board representation,
and will continue to work towards this target this year.
The Board agenda this year has been well balanced
between overseeing the operational resilience of our
business, and planning for the future. Our operating
results speak for themselves, notwithstanding the impact
on the statutory results (FY21 statutory PBT: £47.2m FY20:
£137.9m) of exceptional charges. We were delighted to
deliver a 6% uplift to £191.3m in adjusted profit before
tax, the profit measure we use to manage the business.
Strategically, the Board focused on four key topics. We
remain wholeheartedly convinced by our growth prospects
in North America and encouraged by the progress being
made at Checkatrade to build a market-leading online
platform to match consumers with trades. In the UK, we
took the difficult decision to fully impair our investment in
the eServe customer relationship management system, and
in the coming years the Board will support the UK business
as it embraces digitisation and automation and refreshes its
customer base. The Board also spent considerable time on
international business development. With the exception of
our high potential joint venture with Mitsubishi Corporation
in Japan, we decided to adopt a “near neighbour” strategy,
to make the most of our existing infrastructure and minimise
risk, and focus on adjacent territories such as Canada,
Belgium and Portugal.
Given the resilience of our business in FY21 and strong
prospects for future growth, the Board proposes a final
dividend of 19.8p to take the total dividend for the year to
26.0p. This represents an increase of 10%, significantly ahead
of FY21 growth in adjusted earnings per share.
To fulfil our purpose to make home repairs and
improvements easy, our strategy, in a nutshell, is to
match customers’ needs with trades, to generate repeat
and recurring income. In order to assure the long-term
sustainability of our business, we must do this responsibly,
not least because of the deep emotional attachment we all
have to our homes.
The last topic I want to highlight is our progress this year
on articulating our responsible business approach, which is
based around four key pillars.
HomeServe plc Annual Report & Accounts 2021 HomeServe plc Annual Report & Accounts 2021
Strategic report
Chairman’s statement
5
Our Chairman designate
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Delivering for
our customers
Building the workforce
of the future and treating
our people responsibly
TOMMY BREEN
I want to start by acknowledging the importance of the
contribution Barry has made to HomeServe in his 17 years
on the Board. HomeServe is built on strong foundations
and has an exciting future ahead of it. Barry’s influence
and oversight have been significant in getting us to where
we are today.
I am excited and honoured to be taking over as Chairman
at a time of opportunity for significant development of
the business in the coming years.
Since joining the Board in January, I have spent the
time meeting (albeit virtually) many of the senior team
and getting to understand the business. I am hugely
impressed with the entrepreneurial culture, drive and
ambition emanating from Richard and percolating
throughout the Group.
I am looking forward to working with Richard and all of
the Board on behalf of all of our stakeholders, to continue
the great HomeServe growth story.
Tommy Breen
Chairman designate
Using our skills to
support communities
we touch
Participating in the
transition to a lower
carbon future
In the course of the year, we have done the right thing for
our customers, our people and our communities, put more
formal responsible business policies in place and for the
first time, committed to a carbon reduction pathway of 1.5
degrees by 2030 in respect of our Scope 1 & 2 emissions, a
42% reduction on our 2020 baseline.
With operational resilience proven and future prospects
strong, I am delighted to be handing over the Chairmanship
of this great company to Tommy Breen. I do so in the
certain knowledge that I am leaving HomeServe and all of its
stakeholders in good hands. It remains for me to say a very
sincere thank you to everyone who has supported me in my
time with the company, and to wish you all the very best for
the future.
JM Barry Gibson
Chairman
18 May 2021
6 Strategic report
Chief Executive’s review
Chief Executive’s review
RICHARD HARPIN
This has been an extraordinary year, with our entire financial
year playing out under the shadow of the COVID pandemic.
Throughout, we have remained focused on doing the
right thing for our people and our customers, and this has
paid dividends. It is great to report that we have grown
our revenue by 15% and, notwithstanding the impact on
the statutory result of exceptional charges (FY21 statutory
PBT: £47.2m, FY20: £137.9m), adjusted PBT rose by 6%. This
demonstrates the power of our business model and the
dedication of our people: I am grateful to every single one of
them. We have also made significant progress strategically
this year, which sets us up well for continued strong growth.
One of the most difficult decisions we took this year was
to halt the implementation of eServe, the UK CRM solution
we procured in 2013. This drove an exceptional charge
of £84.8m, which reduced statutory profit before tax to
£47.2m (FY20: £137.9m). eServe was highly configured
to our business and became costly and inflexible to
implement, with further configuration issues emerging as
implementation progressed. It will be replaced by a more
flexible, cloud-based solution. Current planning suggests this
will be a Salesforce solution, similar to those implemented
successfully in France and planned for implementation in
North America. As ever at HomeServe, we will look very
carefully at what we can learn from this experience. We now
have the opportunity to move forward and standardise on
an industry leading solution.
“In the last year, we have all been working,
learning, exercising and socialising from
home, and our homes have become more
important to us than ever. HomeServe’s
purpose is to make home repairs and
improvements easy, whether it be fixing
wear and tear or helping us transform our
homes and gardens. We have seen more
demand than ever for our services.”
The right people in the right roles
As of March 2021 we have been operating in three divisions,
each with different financial profiles: Membership & HVAC
(Heating, Ventilation and Air Conditioning) – North America;
Membership & HVAC – EMEA; and Home Experts. To ensure
that each gets the focus it deserves, they are each run by
one of our Executive Directors, with our fourth Executive
Director, CFO David Bower, focusing on Group-wide
considerations. The key areas of focus for each division are
as follows.
Membership & HVAC – North America
Tom Rusin is focused on delivering our medium-term
growth targets and developing our North American
partnerships, product suite and service capability to keep
growing beyond our $230m adjusted operating profit
milestone. Tom has global product line responsibility for
Membership.
Membership & HVAC – EMEA
Ross Clemmow joined us in March 2021, and brings online
retail, digital and private equity transformation experience
to our executive team. He is focused on adding value
to our established businesses in France, Spain and the
UK, and on developing new routes to growth, including
through expansion into adjacent markets in Europe. He
also has responsibility for our joint venture in Japan. Ross
has global product responsibility for HVAC, where we now
have a global portfolio of 46 businesses and installation
revenue of £101.6m. There are significant opportunities to
develop HVAC as a new channel for policy sales and realise
efficiencies as we build a global HVAC infrastructure.
Home Experts
I work directly with the leaders of our Home Experts
businesses in the UK, North America and Spain to build a
market-leading model to match consumers with trades
online, and to share expertise across our businesses.
HomeServe plc Annual Report & Accounts 2021 Strategic report
Chief Executive’s review
7
Membership & HVAC – North America
Our North American business had a great year, despite
much reduced marketing volumes in the first few months
of the pandemic. We achieved 7% predominantly organic
customer growth to 4.7m, 85% retention (an increase of
two percentage points), 22% revenue growth of which 9
percentage points were organic, 27% growth in adjusted
operating profit to $137.9m and a percentage point
improvement in margin to 21%. We were delighted to sign
new partner agreements which cover 6m new households,
a 59% increase on gross new household adds in FY20,
despite the interruption in utility partner conversations early
in the pandemic. We made good decisions to withdraw
from relationships where marketing returns had started to
decline, and instead to market direct. We ended the year
with access to 66m households (a net 2m increase), with our
pipeline of potential new partners at its strongest ever. Our
HVAC business had an outstanding year, with installations
revenue growth of 43% to $76.0m. We are making excellent
progress towards our previously announced $230m
operating profit target, and are starting to look beyond our
medium-term targets to the long-term continued growth
potential of our business in North America.
Membership & HVAC – EMEA
All of our European businesses display attractive
characteristics: loyal, recurring customers with high
retention rates; strong and stable cash generation and
several opportunities for growth through new partners, new
channels and new markets.
The UK is HomeServe’s most established market. The UK
business continues to deliver attractive returns and provides
a high quality service to a smaller number of loyal customers
that value and use our products. Under the new leadership
of John Kitzie, previously CEO of our North American
business, we have developed plans to take the UK business
forward and return it to a growth trajectory.
With this new transformation programme, we have started
the process of reversing the long-term customer decline
which drove a 10% fall in adjusted operating profit to £72.5m.
John is one of our very best operational leaders, and brings
with him significant experience of the operational processes
and technology that have created a strong platform for
growth in North America. John’s initial focus will be to bring
these operational best practices to the UK. As an example,
we are making rapid progress in claims automation and in
driving efficiency in our field-based service operations.
Alongside the implementation of operational best practices,
our UK team is developing opportunities to return to top line
growth through digitisation, improved marketing and new
partnerships. We will also implement the successful HVAC
buy-and-build strategy already in progress in North America,
France and Spain.
In France, we added 0.2m gross new customers, our highest
ever level and a 10% year-on-year increase, to end the year at
1.2m customers in total. Investment in growth opportunities
including a renewed partnership with Veolia and accelerated
customer acquisition via digital channels meant that adjusted
operating profit grew relatively modestly, up 2% to €39.8m.
Our French business is characterised by strong working
relationships with long-term and newer affinity partners and
excellent IT implementations, with our legacy customer
management system now replaced with Salesforce. The
HVAC buy-and-build strategy is performing well in France
and marketing activity with Eneco Belgium will scale up as
the COVID pandemic subsides. In its 20th anniversary year, it
is great to see our French business continue to grow.
In Spain, performance improved in the second half in
Claims, after Claims turnover suffered early in the pandemic
just as we boosted our resources in anticipation of higher
volumes. The first half effect of this investment drove a 14%
fall in full year adjusted operating profit to €19.8m. Mesos
is proving to be a successful acquisition in the Claims
space and gives us service capability in Portugal. HVAC
is performing well and in Membership, discussions are
ongoing with a range of energy companies to develop new
Membership propositions.
Our joint venture with Mitsubishi Corporation in Japan
continues to progress well, with two partnerships giving us
access to c.7m households and the partner pipeline strong.
We have over 17,000 customers, are seeing good take-up
on marketing campaigns and early indications suggest a
very strong retention rate. It is still early days, but prospects
for the Japanese market look good and we are happy to
continue to invest at current levels to realise this potential.
Home Experts
During the COVID pandemic, consumers spent more
time and money than ever around their homes. British
homeowners spent an average of £2,608 on home
improvements in 2020, an increase of 15%, according to
Checkatrade research. We continued to develop our Home
Experts platforms at pace to match more homeowners with
trades (tradespeople) online.
Checkatrade continued to strengthen its leadership position
in the UK with the highly successful ’Julius Caesar’ television
advertising campaign. Consumer visits to the website grew
a market-leading 23% to 29m and the number of contacts
(telephone calls and quote requests) between consumers
and trades grow strongly to 8.1m. On the supply side, the
number of trades grew 11% to 44,000 paying trades. Our
decision to support our trades with deep discounts in the
first three months of the pandemic helped keep trades on
the platform when they were not working or earning. A key
area of focus at Checkatrade is to improve the distribution
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 8 Strategic report
Chief Executive’s review
Chief Executive’s review
Continued
of contacts, so that as many trades as possible see value
from their subscription. These systematic enhancements
are expected to drive an acceleration in trades acquisition
and retention in FY22, as Checkatrade’s predominantly
subscription-based model moves towards profitability in
FY23 and substantial growth beyond.
eLocal had a very successful first full year as part of
HomeServe, delivering a 32% increase in monetised calls
on a like-for-like basis, to 3.6m, a first full year of revenue
of $119m and an adjusted operating profit contribution of
c.$18m. eLocal has a proven model and strong potential for
growth in the under-penetrated US market.
At Habitissimo, the transition of the business model
continues, with the launch of Directory Extra expected to
stimulate more matches for Habitissimo’s 89m website visits.
Doing business responsibly
For most of us, our home is a refuge. Because we work in
people’s homes, doing business responsibly is crucial to our
continued success. The resilience of our business model
depends above all on the dedication of our people and the
service they provide to our customers.
I have always been impressed by the courage, persistence
and integrity our people show every day in the service of
our customers, and this year we matched this everyday
reality with increased prominence for responsible business
initiatives on our Board agenda. We created a Corporate
Responsibility Committee in January 2021 and agreed four
key areas of focus:
• Delivering for our customers
• Building the workforce of the future, treating our people
responsibly and embracing diversity
• Using our skills to support the communities we touch
• Participating in the transition to a lower carbon future.
We are now committed to a carbon reduction pathway of
1.5 degrees by 2030 in respect of our Scope 1 & 2 emissions,
a 42% reduction from our 2020 baseline. Opportunities
are emerging to help homeowners participate in the green
revolution and support decarbonisation, for example
through alternative heat sources and the installation of
electric vehicle charging points. I was particularly pleased
with the launch of the HomeServe Foundation in the UK
this year, to champion the recruitment and training of
more apprentices for our industry. We see doing business
responsibly as a differentiator and an opportunity, and I am
looking forward to seeing it continue to deliver benefits.
A tribute to Barry Gibson, and welcome to Tommy Breen
Tommy Breen takes over as Chairman from Barry Gibson
on 19 May 2021. Barry has been on the HomeServe Board
since the demerger from South Staffs Water in 2004, and
has chaired the Board with dedication and skill since 2010.
He has always championed putting the customer at the
heart of everything we do, and focuses above all else on
people. Barry created the Board People Committee and
championed talent recruitment and development, diversity
and inclusion. I want to express my sincere thanks to Barry,
who helped steer HomeServe from a market capitalisation
of £300m to close to £4 billion. It was a fitting tribute to
Barry’s achievements that he was the 2021 FTSE All Share
winner at this year’s Non-Executive Director Awards.
In Tommy Breen, we have found a worthy successor to
Barry. Tommy is an experienced non-executive director and
until 2017 was Chief Executive of DCC plc, where he spent
a highly successful 30 year career. A chartered accountant
by training, Tommy brings to HomeServe an extensive
track record of delivering sustainable growth in a diverse,
international business, both organically and by acquisition.
Tommy started adding value to our Board as soon as he
joined in January 2021, and I am very much looking forward
to working with him.
Conclusion
HomeServe makes home repairs and improvements easy
by matching customers’ needs with trades (tradespeople),
to generate repeat and recurring income. Our continued
progress towards our ambition of doing every job, in every
home takes me back to where I started this review – to
our people. Our March 2021 employee survey shows
engagement ahead of pre-pandemic levels, with each of
our businesses currently certified as a Great Place to Work.
The dedication shown by our people to our customers and
our business during the pandemic has been extraordinary. I
am very proud of what we have all achieved in the last year,
and we are now well placed to achieve significant growth in
the coming year and beyond.
In FY22, we expect to see strong growth in our North
American Membership & HVAC business and continued
progress in Home Experts, particularly at Checkatrade. Our
European Membership & HVAC businesses remain resilient
and cash generative, each with routes to future growth. We
are confident in the Group’s prospects and expect to return
to a trajectory of strong earnings growth in FY22.
Richard Harpin
Founder and Chief Executive
18 May 2021
HomeServe plc Annual Report & Accounts 2021 HomeServe plc Annual Report & Accounts 2021
Strategic report
Chief Executive’s review
9
Delivering for
our customers
I
I
S
S
T
T
R
R
A
A
T
T
E
E
G
G
C
C
R
R
E
E
P
P
O
O
R
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T
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Our customers are at
the heart of our business.
10 Strategic report
Market overview
Market overview
FY21
As a result of the COVID pandemic,
homeowners spent more time and money at
home. Whether it be on DIY or tradespeople,
spend on home repairs and improvements
increased, both to combat wear and tear
and to adapt our homes to home working.
By way of illustration, consumer visits to the
Checkatrade website increased 23% in the
course of the financial year, to 29m.
Looking forward, the HomeServe Foundation’s
UK Domestic Skills Index predicts a home
improvements boom in the next decade, driven
in part by the green revolution. This will be
accompanied by a skills shortage if action is
not taken to recruit younger workers into the
construction industry, an issue championed by
the HomeServe Foundation’s drive to encourage
the recruitment of apprentices. Demand for high
quality trades is set to increase.
See page 28 for more on the HomeServe
Foundation.
Our target market: homeowners
Based on our experience worldwide over our three
decades of trading, we have insight into the typical levels
of consumer adoption of home assistance policies which
enables us to segment homeowners into three groups.
Insurance minded
• Want to avoid the disruption of dealing with a problem in
their home
• Like to budget carefully and avoid unexpected repair bills
• Tend to be an older demographic; often on fixed incomes
HOMESERVE OFFER
Membership
HVAC
What’s changing?
This segment constantly renews as homeowners’
circumstances change. Many buy a policy when they retire, and
only give it up when they move into sheltered accommodation.
There may be a demographic shift in this segment as younger
homeowners accustomed to subscriptions in other areas of
their lives – Spotify, Netflix – consider buying a policy, having
been targeted through direct marketing and social media.
MARKET SIZE 1
HOME ASSISTANCE MARKET PENETRATION
Membership
HVAC
This is our traditional market in the geographies where we
are currently established, and essentially covers specialist
home emergency cover for plumbing, heating and
electricals. Membership was HomeServe’s first business,
which we have been operating since 1993. We are now
adding to our HVAC installation capabilities in the UK, North
America, France and Spain, to be able to replace equipment
for customers as well as repair and service it.
Home
assistance
£14bn
Home repairs and
improvements £450bn
There is a marked difference in penetration between our
most mature market, the UK, and our highest growth
market in North America.
UK: 27m households
Unserviced
Other
Addressable
market
8m
homes
Home Experts
This is a much broader market, covering trades from
plumbing to kitchen fitting, carpet cleaning to garden design.
It is an expanding market, as more and more trades are
invented to serve the needs of modern-day homeowners.
Professional flat pack furniture assemblers and home WiFi
gurus did not exist ten years ago! We expect it eventually to
follow property, car purchases and travel, all of which are
now over 60% online.
The UK market, where our traditional focus is on water,
is nearing maturity. The UK is the only market where
HomeServe has a bigger competitor, but the competitive
dynamic is stable. There may be opportunities over time
to buy small policy books or work with challenger energy
companies as they disrupt the status quo.
See page 41.
1 Market size estimates incorporate the UK, US, France and Spain and are based on national statistics where available, supplemented by HomeServe estimates.
HomeServe plc Annual Report & Accounts 202130%
HomeServe plc Annual Report & Accounts 2021
Strategic report
Market overview
11
DIYers
Home Improvers
• Have the knowledge, skills and motivation to carry out
• Find a trade when needed – by word of mouth, paper
repair work themselves
directories and increasingly online
• These homeowners may call on a third party for jobs
requiring specialist skills, equipment or qualifications
• Finding a high quality trade, without hassle, is often just
as important as financial considerations
HOMESERVE OFFER
HVAC
Home Experts
What’s changing?
In most countries, there are fewer confident DIYers and
younger homeowners are less likely to live closer to the
support network provided by their family.
• Typically appeals to a younger demographic whose
instincts are to search online
HOMESERVE OFFER
Home Experts
What’s changing?
There is big growth potential when we look to where
consumers in other industries spend their time and money
today compared to what we see in home services. This
segment is increasingly moving online, initially to “online word
of mouth” like community Facebook groups, but eventually to
platforms which match consumers and trades.
Our experience shows that with most affinity partners,
maximum uptake amongst their customer base is around
30% worldwide. This defines our addressable market.
North America: 151m households
Unserviced
Addressable
market
45m
homes
Whole Home
Warranty
Acquirable utility
policy books
North America remains a significantly under-penetrated
market. A key to growth is to sign more affinity partners
to reach the over 50% of households who have yet to see
a HomeServe offer from their utility. There are various
whole home warranty providers including Frontdoor.
HomeServe is building a total home warranty offer,
differentiated by our strong customer service.
See page 39.
Competitive positioning
Competitive dynamics remain relatively stable. In
Home Assistance, HomeServe remains the foremost
company to partner with utility companies, which
gives us a unique opportunity to grow market share.
In HVAC, our buy-and-build strategy occasionally
encounters competition from trade competitors and
private equity, but acquisition pricing is largely stable.
In Home Experts, we continue to develop our market-
leading Directory Extra model, and are not aware of
any traditional competitors changing their investment
patterns. As at February 2021, Checkatrade, was used
by 16% of the UK consumers who had work done on
their home in the preceding 12 months – the same
share as the next three largest platforms combined
- with Checkatrade having grown its share by 4ppts.
We continue to monitor activity from potential new
competitors, including big tech companies.
HomeServe remains in a unique competitive position.
We are best placed to serve all three homeowner
segments, and there is significant potential to create
synergies and economies of scale.
STRATEGIC REPORT 20%50%
12
Strategic report
Business model and strategy
Business model and strategy
What we do
HomeServe’s purpose is to make
home repairs and improvements easy,
and our vision is to be the world’s
largest and most trusted provider of
home repairs and improvements.
We achieve this principally in three ways. To insurance-
minded homeowners, we sell policies to cover a range of
home emergencies via subscription-based Membership
services. Our HVAC installation capabilities complete our
service offering for homeowners who need replacement
units. For people who prefer to deal with issues as they arise
(‘Home improvers’), or DIYers who need specialist help,
we have online, on-demand Home Experts platforms that
match homeowners with local trades.
INSURANCE MINDED
Membership
In Membership, our established route to market is via
partnerships with utility companies, for whom we are
an important source of added value. Our data-rich
marketing approach and careful product design help
us to grow our customer base. Our customers stay
with us because of the excellence of our customer
service and the dedication of our people: we do
business responsibly. Our local networks of employed
and subcontracted trades ensure consistently high
service standards whenever we visit a customer’s home.
HOME IMPROVERS | DIYers
Home Experts
In Home Experts, trades (tradespeople) are our
customers, and our job is to match them with
consumers in their local area, who need their
services. This provides our trades with an income
stream and we also provide systems and processes
to help them run their businesses more efficiently.
We aim to support our trades at every stage of their
career, from apprenticeships through building their
career to maintaining their reputation.
ALL TYPES OF HOMEOWNER
HVAC
(Heating, Ventilation and
Air Conditioning)
The answers to three questions sum up our business
model.
1. What are we deeply passionate about?
We are deeply passionate about making home repairs
and improvements easy, for homeowners and trades
(tradespeople). This passion comes alive through our
customer-centric culture and our deep understanding
of customer needs, which has been years in the
making and keeps evolving.
2. What can we be best in the world at?
We have the potential to be best in the world at
matching customer needs with trades, as we develop
our product line; invest in partnerships, marketing,
technology and innovation; and create the world’s
largest trades network.
3. What drives our economic engine?
We understand the value of generating repeat and
recurring income to create sustainable growth and
resilience.
Our ambition
is to do
every job, in
every home.
1
Making home
repairs and
improvements easy
2
3
Matching
customers’ needs
to trades
Generating repeat
and recurring
income
The strength of this business model five key sources of
value, that are distinct to us.
1. Partnerships: we have strong affinity partners who
provide us with our primary route to market.
2. Marketing: our marketing expertise enables us to
reach our homeowners and trades with the right
product at the right price.
3. Customer service: our culture puts the customer at
the heart of everything we do.
4. Local networks: we work with trades (tradespeople) to
deliver great service to homeowners.
5. Financial resources and expertise: we are disciplined
in the way we deploy capital and have clear processes
in place to decide where we will and will not invest.
Executing well relies on deep knowledge of customer
service and the commitment and expertise of our
people. Our responsible business approach focuses
above all on these two stakeholder groups.
See page 20 for Responsible business.
HomeServe plc Annual Report & Accounts 2021 Strategic report
Business model and strategy
13
Our growth strategy
The best products
to match customers
to trades
Generate repeat and
recurring revenues
Invest in
partnerships,
marketing,
technology and
innovation
The world’s
largest trades
network
Attract and
retain more
customers,
trades and
partners
Generate repeat
and recurring
revenues
The best products to match
customer needs to trades
We design our products to match customer needs to trades.
Our expertise is focused on adapting to the needs of individual
markets to create products that customers value and use;
responding efficiently to market or regulatory change; and creating,
developing, testing, launching and assessing the performance of
our products in a speedy, streamlined fashion. Recent innovations
include in Membership, a new offer for the installation and
maintenance of domestic electric vehicle charging points, being
trialled in America, and in Home Experts, the development of
Directory Extra model.
See page 32 PRINCIPAL RISKS: 1 5 6 7 8 9
Our business is predictable, sustainable and cash generative. Our
revenue streams are largely subscription based and we invest in our
people, our network, our brand, our partnerships and our technology
systems and processes to generate growth. We have opportunities to
grow organically and through acquisition in all of our markets and have
a strong track record of successful acquisition and integration. We have
stringent investment criteria which we apply to organic and acquisition
opportunities.
See page 32 PRINCIPAL RISKS: 3 13
Invest in partnerships,marketing,
technology and innovation
We have a strong track record of developing productive
partnerships with firms whose skills and assets complement ours.
In Membership, our most established route to market is through
long-term, exclusive partnerships with utilities, insurance companies
and specialist service providers. We have a substantial network of over
1,000 utility partners, and considerable expertise in managing these
partnerships for mutual benefit. Our utility partners earn commission
on every policy we secure through them and benefit from our long-
term approach to delivering value. HomeServe acts as an insurance
intermediary, and does not take any material insurance risk. Our
Membership products are underwritten by independent third party
underwriters. We are investing in technology to automate and digitise our
customer experience, and are working with our partners to build products
for the green homes revolution.
In Home Experts, we work in partnership with trades – single traders,
small and large firms – as well as specialists such as web developers.
See page 32 PRINCIPAL RISKS: 4 5 6 9 10
Attract and retain more
customers, trades and partners
We reach our customers through data-rich marketing, optimised
in Membership across a range of channels including direct mail,
contact centres and online and in Home Experts direct and online,
with sophisticated monitoring of campaign paybacks.
We retain our customers by putting them at the heart of everything
we do. This shines through in the way our Membership contact
centres operate to handle customer claims and enquiries, and
also in the way our engineers behave in customers’ homes. In
Home Experts, we constantly adapt our model to help trades
build their businesses and reputations. We engage the best people
right across our business and provide them with the tools and
technology they need to do a great job. We have internal measures
for customer satisfaction in each of our businesses and we are
proud of the external awards we win across the world.
We deploy our brands to best advantage. While the HomeServe
brand is becoming increasingly well known, we also recognise the
power of acquired brands such as Checkatrade and Cropp Metcalfe
in their home marketplaces.
Develop the world’s largest
trades network
We rely on our local networks to deliver consistently high service in our
customers’ homes and we have many years of experience and expertise
in managing these networks. We devote considerable time to recruiting
and maintaining our networks and providing the infrastructure and
technology required for them to operate efficiently. In our Membership
business we optimise our mix of directly employed engineers and
sub-contractors and in our Home Experts business we are focused on
delivering rapid growth in the number of trades we work with to deliver
on-demand repairs and improvements
See page 32 PRINCIPAL RISKS: 1 6 7 10
Our principal risks, and in particular our Group Enterprise risks, each
impact elements of our business model, and thereby our growth
strategy and future profitability. The impact of some but not all risks
could lead to upside potential as well as downside threat. For example,
market disruption in the digital world may also accelerate customer
take-up; or in respect of partnerships, we may conceivably sign more
partners than we expect in North America.
See page 32 PRINCIPAL RISKS: 2 6 7 10
See page 20 for Responsible business.
PRINCIPAL RISKS:
1 Competition 2 Information security and cyber resilience 3 M&A strategy 4 Underwriting capacity and concentration 5 Regulation
6 Digital transformation 7 Technology investment 8 HVAC integration 9 Partner loss 10 People 11 International 12 Failure to deliver strategic growth
13 Financial
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 1
FY21 UPDATE
North American Membership and HVAC had a great
year, despite much reduced marketing volumes in
the first few months of the pandemic. We achieved
7% predominantly organic customer growth to
4.7m, 85% retention (an increase of two percentage
points), 22% revenue growth of which 9 percentage
points were organic, 27% growth in adjusted
operating profits to $137.9m and a percentage point
improvement in margin to 21%. We were delighted to
sign new partner agreements which cover 6m new
households, a 59% increase on gross new customer
adds in FY20, despite the interruption in utility
partner conversations early in the pandemic. We
made a good decision to withdraw from relationships
where marketing returns had peaked, and market
direct instead. We ended the year with access to 66m
households (a net 2m increase), with our pipeline
of potential new partners is at its strongest ever.
Our HVAC business had an outstanding year, with
installations revenue growth of 43% to $76.0m. We
are making excellent progress towards our previously
announced $230m operating profit target, and are
starting to look beyond our medium-term targets
to the long-term continued growth potential of our
business in North America.
14 Strategic report
Business model and strategy
MEMBERSHIP & HVAC – NORTH AMERICA
Our Membership product line appeals to
insurance-minded homeowners who are
minded to buy policies to remove the hassle
and cover the cost of household repairs.
We drive growth in our Membership businesses by:
• developing new partnerships to give us access to more
homeowners
• marketing effectively to turn homeowners into
customers
• adding value to our products to increase net income
per customer, and
• providing excellent customer service to encourage our
customers to stay with us.
We have significant opportunities to deploy new
technology, systems and processes to provide state of the
art customer service and increase the efficiency of our
operations.
Developing the capability to install and replace heating,
ventilation and air conditioning (HVAC) units completes the
circle of service we provide for our Membership customers.
It also gives us new opportunities to sell Membership
policies and participate in the green revolution to promote
new sources of domestic energy. Our strategy is to acquire
and integrate high quality local businesses, work with their
management teams and apply our marketing expertise to
help them grow.
Targets
North America Membership & HVAC represents our
biggest short to medium term growth opportunity.
FY21
Medium to long-term target
Customers
Income per customer
Margin (policies)
4.7m
$108
25%
6m - 7m
$120 - $125
24% - 26%
HVAC profit
$10m
$30m - $45m
Adjusted operating profit
$138m
$230m
KEY PERFORMANCE INDICATORS:
Affinity partner households
Customers
Policies
Retention rate
Income per customer
PRINCIPAL RISKS:
1 Competition 3 M&A strategy
4 Underwriting capacity and concentration 5 Regulation
6 Digital transformation 7 Technology investment
8 HVAC integration 9 Partner loss 10 People 13 Financial
HomeServe plc Annual Report & Accounts 2021 MEMBERSHIP & HVAC – EMEA
HomeServe’s European Membership
businesses are more established than our
North American business.
All of our European businesses display the attractive
characteristics of good visibility and strong cash generation,
and have routes to future growth.
We entered the Japanese market in a joint venture with
Mitsubishi Corporation in February 2019. Mitsubishi
Corporation is very successfully facilitating introductions to
Japanese utility companies.
KEY PERFORMANCE INDICATORS:
Affinity partner households
Customers
Policies
Retention rate
Income per customer
PRINCIPAL RISKS:
1 Competition 3 M&A strategy
4 Underwriting capacity and concentration 5 Regulation
6 Digital transformation 7 Technology investment
8 HVAC integration 9 Partner loss 10 People
11 International 13 Financial
FY21 UPDATE
For the UK, this has been a transition year in which
we started the process of reversing the long-term
customer decline which drove a 10% fall in operating
profits to £72.5m. John Kitzie, previously CEO of our
North American business, transferred to become CEO
of HomeServe UK in September 2020. John is looking
at opportunities to return our UK business to top line
growth through digitisation, direct marketing and
developing our partnerships, and he will implement
the successful buy-and-build HVAC strategy we are
following in North America, France and Spain. John is
also making rapid progress on claims automation and
driving efficiency in our service operations. He has
taken the decision to revert the minority of customers
on this platform back to the existing Ensura CRM
system, which is the proven system of record in North
America. Following a period of decommissioning,
eServe will be replaced by a flexible, cloud-based
solution. Current planning suggests this will be a
Salesforce solution, similar to those implemented
successfully in France and planned for North America.
In France, we added 200k gross new customers, our
highest ever level and a 10% year-on-year increase,
to end the year at 1.2m. Investment in growth
opportunities including a renewed partnership with
Veolia and accelerated customer acquisition via digital
channels meant that operating profit grew relatively
modestly, up 2% to €39.8m. Our French business is
Strategic report
Business model and strategy
15
2
characterised by strong working relationships with
long-term and newer affinity partners and excellent
IT implementations, with our legacy customer
management system now replaced with Salesforce.
The HVAC buy-and-build strategy is performing well
in France and marketing activity with Eneco Belgium
will scale up as the COVID pandemic subsides. In its
20th anniversary year, it is great to see our French
business continue to grow.
In Spain, performance improved in the second half
in Claims and HVAC, after Claims turnover suffered
early in the pandemic just as we boosted our cost
base in anticipation of higher volumes. This first half
effect drove a 14% fall in full year operating profit to
€19.8m. Looking forward, Mesos is proving to be a
successful acquisition in the Claims space and gives
us service capability in Portugal. HVAC is performing
well and in Membership, discussions are ongoing
with a range of energy companies to develop new
Membership propositions.
Our joint venture with
Mitsubishi Corporation
in Japan continues to
progress well, with two
partnerships giving us
access to 7m households
and the partner pipeline
strong. We have over
17,000 customers, are
seeing good take-up on
marketing campaigns and early indications suggest
a very strong retention rate. It is still early days, but
prospects for the Japanese market look good and we
are happy to continue to invest at current levels to
realise this potential.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 3
16
Strategic report
Strategy
HOME EXPERTS
Home Experts enables HomeServe to serve
the home improvers customer segment:
homeowners who go online to find a local
trade to help them with home repairs and
improvements.
We have three online platforms:
the UK’s leading online
directory of checked and
vetted trades
the market leader in Spain
in the US, where we acquired
a 79% stake in November
2019.
Each platform is currently pursuing its own growth path,
and we are learning from each opportunity. Over time,
we expect to move towards a single winning model –
Directory Extra. Homeowners will be able to choose from a
directory of checked and vetted trades for substantial home
improvement projects such as fitting a new kitchen, or be
automatically matched with a qualified trade, for example
for smaller, time critical jobs such as mending a dishwasher.
We have a multi-year investment project under way to build
out our network of trades and generate consumer demand
through effective marketing, to help trades grow and
manage their businesses.
The most advanced investment plan is at Checkatrade.
Targets for Checkatrade
FY21
Medium to long-term target
Trades
44,000
150,000 - 200,000
Average revenue per trade
£939
£1,200 - £1,300
Margin
—
25% - 35%
Adjusted operating profit
(£16m)
£45m - £90m
KEY PERFORMANCE INDICATORS:
Trades
Web visits
PRINCIPAL RISKS:
2 Information security and cyber resilience 6 Digital transformation
7 Technology investment 10 People 13 Financial
FY21 UPDATE
During the COVID pandemic, consumers spent more
time and money than ever around their homes. We
continued to develop our Home Experts platforms
at pace to match more homeowners with trades
(tradespeople) online.
Checkatrade continued
to strengthen its
leadership position in
the UK with the highly
successful “Julius
Caesar” television
advertising campaign.
Consumer visits to the website grew a market-leading
23% to 29m and the number of contacts (telephone
calls and quote requests) between consumers and
trades almost doubled to 8.1m. On the supply side, the
number of trades grew 11% to 44,000 paying trades.
A key area of focus at Checkatrade is to improve the
distribution of contacts, so that as many trades as
possible see value from their subscription. These
systematic enhancements are expected to drive an
acceleration in trades acquisition and retention in
FY22, as Checkatrade’s subscription-based model
moves towards profitability in FY23 and substantial
growth beyond.
eLocal had a very successful first full year as part of
HomeServe, delivering a 32% increase in monetised
calls, to 3.6m, a first full year of revenue of £91.3m
($119.0m) and a profitable contribution of c.$18m.
eLocal has a proven model and strong potential for
growth in the under-penetrated US market.
At Habitissimo, the transition of the business model
continues, with the launch of Directory Extra expected
to stimulate more matches amongst Habitissimo’s
89m website visits.
The Home Experts division is expected to achieve
profitability in FY22.
HomeServe plc Annual Report & Accounts 2021 Strategic report
Strategy
17
Building the workforce
of the future and treating
our people responsibly
If we take care
of our people, our
people will take care
of our customers
and our business.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 18 Strategic report
Key performance indicators
Key performance indicators
At HomeServe we measure progress against the key strategic initiatives of our global business lines by tracking eight Key
performance indicators (KPI). Directors’ remuneration is structured to support the Group’s strategy and its financial and
operational performance. As such, certain of the KPIs, of those listed below, form part of the performance measures to which
Executive Directors’ remuneration is linked.
See page 97 ‘Directors’ Remuneration Policy’. Definitions for each KPI are given
below,
factors driving movements on the prior year, are discussed in more detail at the country level in the Operating review.
See page 215 Glossary for more detail. In addition to the strategic initiative to which they correspond the KPI, and
Affinity partner households
m
118
6%
Customers
m
8.4
1%
2021
2020
2019
2018
2017
118
105
111
109
102
2021
2020
2019
2018
2017
8.4
8.3
8.4
8.4
7.8
Tracks the growth in Membership’s addressable market,
delivered through existing and new partnerships with utilities
and municipals.
Tracks our success in converting our addressable market into
revenue-generating customers by delivering great products and
services.
Strategy
1 2
MEMBERSHIP & HVAC – NORTH AMERICA
MEMBERSHIP & HVAC – EMEA
Strategy
1
2
MEMBERSHIP & HVAC – NORTH AMERICA
MEMBERSHIP & HVAC – EMEA
Good growth driven by signing over 2 new partners a week in
North America.
Continued strong growth in North America with customers
up from 4.4m to 4.7m, giving further confidence in the
medium to long-term target of 6-7m customers in this
territory. Offset by Spain where the Endesa book is in run-off
and a reduction in the UK.
Policies
m
16.1
1%
2021
2020
2019
2018
2017
Retention rate
%
83
1ppt
16.1
15.9
15.9
15.7
2021
2020
2019
2018
2017
14.3
83
82
82
82
82
Illustrates our ability to grow our product line through customer
focus and innovation and to market those policies to customers.
Strategy
1 2
MEMBERSHIP & HVAC – NORTH AMERICA
MEMBERSHIP & HVAC – EMEA
Existing customers are continuing to choose more products
and benefit from increased cover. 10% increase in North
America, partially offset by Spain where the Endesa book is in
run off and a reduction in the UK.
The percentage of policies which are renewed after 12 months
for a further term. This reflects our ability to deliver fit-for-
purpose products and great service to our customers.
Strategy
1
2
MEMBERSHIP & HVAC – NORTH AMERICA
MEMBERSHIP & HVAC – EMEA
Retention rate up by 1ppt, driven by increase in North
America, with other territories broadly stable.
HomeServe plc Annual Report & Accounts 2021 Strategic report
Key performance indicators
19
3%
Trades
k
64
2021
2020
2019
2018
2017
64
66*
64
58
47
The number of paying customers in our Home Experts
business, being tradespeople. Tracks our progress in building
the supply of a large online community of trades. For
Checkatrade in particular this KPI measures progress to our
stated long-term goal of 150-200k trades.
Strategy
HOME EXPERTS
3
Total trades at Checkatrade grew 11% to 44k, whilst trades at
Habitissimo fell by 4k to 20k.
*2020 included eLocal.
Adjusted profit before tax
£m
191.3
6%
Income per customer
3%
£144
6%
$108
1%
€109
2%
€60
North America
UK
France
Spain
Measures our ability to design and market increasingly valuable
products, and sell them efficiently. Due to currency difference,
we track this measure at a geographic level.
Strategy
1 2
MEMBERSHIP & HVAC – NORTH AMERICA
MEMBERSHIP & HVAC – EMEA
Growth in all businesses apart from Spain.
Web visits
m
118.0
6%
2021
2020
2019
2018
2017
118.0
110.9
101.1
97.4
2021
2020
2019
2018
2017
71.4
191.3
181.0
161.7
141.7
112.4
Total web visits to our Home Experts platforms Checkatrade &
Habitissimo. Tracks our success in driving consumer awareness
of our online community of trades. This excludes eLocal, for
which monetised calls is the key live metric.
Strategy
HOME EXPERTS
3
We continue to drive higher consumer awareness of the
availability of local trades through our Home Experts
businesses.
Our key profit measure by which we monitor business growth,
efficiency and sustainability.
Strategy
1 2
3
MEMBERSHIP & HVAC – NORTH AMERICA
MEMBERSHIP & HVAC – EMEA
HOME EXPERTS
Robust profit growth, driven by strong performance in North
America.
See page 210 Glossary for reconciliation back to
equivalent statutory measure.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 20
Strategic report
Responsible business
Responsible business
An introduction from the
Chairman designate
TOMMY BREEN
The resilience of HomeServe’s business model is based
on doing business responsibly – and on the dedication
of our people and the service they provide to our
customers. This has never been more important than
during the COVID pandemic. The last year only served
to emphasise the significance of our homes and the
emotional attachment we have to them. The fact that
HomeServe works in people’s homes means that doing
business responsibly is crucial to our continued success.
While HomeServe has a strong culture of doing business
responsibly, there has been a step change during the
last financial year in Board-level focus, particularly on
our environmental impact. We created a Corporate
Responsibility Committee in January 2021, which I
will chair going forward. Our Environmental Policy
and targets have been approved, with implementation
plans now being put in place. We have also formalised
our Responsible Business Policy and updated and re-
published our Code of Business Conduct. Much of our
work so far has been to formalise and document what
we already do, but by upping our game particularly
around our environmental impact, we have shown
everyone at HomeServe that this work is strategically
important, and that we care.
We are at the early stages of a long journey, in which I
look forward to participating.
Tommy Breen
Chairman designate
Our stakeholder engagement
During the COVID pandemic, we invested more than ever in
our relationships with key stakeholders in order to maintain
and grow the resources and relationships on which our
business is based.
Homeowners
Homeowners are the key consumers of our services, and
making home repairs and improvements easy for them is at
the core of our business. It is essential that we remain abreast
of their changing needs and requirements through market
research and customer feedback. We want homeowners’
interest in HomeServe to increase, and are working to build
brand awareness to achieve this goal.
FY21 UPDATE
During the COVID pandemic, we responded quickly to
maintain service levels and to adapt to local restrictions
and requirements. We enabled all of our contact centre
staff to work efficiently from home.
In the UK, we used spare
engineer capacity while
only emergency jobs were
permitted to do over 3,000
emergency jobs free of
charge for key workers. As
a result of these actions,
our high levels of customer
satisfaction and retention
have been preserved in our
Membership businesses.
Affinity partners and the
communities they serve
Affinity partnerships with utilities provide our most important
marketing channels in Membership. We continue to expand
our range of partnerships, but recognise the importance
of maintaining our existing relationships, understanding
the pressures and opportunities in the utilities sector and
delivering excellent customer service to justify our partners’
faith in us. We work with our partners to add value to the
communities they serve.
FY21 UPDATE
During the COVID pandemic, we
maintained our role in the supply
chain, for example by continuing
to pay to terms, to share our
resilience with our partners.
HomeServe plc Annual Report & Accounts 2021 Trades (tradespeople) including
directly employed engineers and contractors
We want to make home repairs and improvements easy for
trades as well as homeowners. For our business to grow,
the network of trades we work with must expand – be they
directly employed engineers, the sub-contractor network
that powers our Membership business, or the trades who
find work via Checkatrade, Habitissimo and eLocal. We are
working to deliver value to our trades, wherever they sit in
our network, and expect their influence on our business to
increase as we grow.
Checkatrade engages with its members in a number of
ways, for example via the Checkatrade Community – an
online platform used exclusively by Checkatrade members.
The platform was set up in 2019 and now has nearly 9,000
trades signed up, who are all given the opportunity to
engage directly with Checkatrade representatives and offer
their feedback and suggestions on existing products. Around
150 forum members have also applied to be involved in
Checkatrade’s Member Research Group, which allows
the business to gain valuable feedback on new ideas and
innovations before they launch to a mass audience.
FY21 UPDATE
During lockdown, our
Board took the decision
that none of our workforce
should be furloughed or
lose their jobs. In addition,
we offered discounts to
our Checkatrade members
in the months where they
were not allowed to work,
to help them reduce their overheads and keep their
businesses afloat. In this way, we preserved and grew
our trades network.
FY21 UPDATE
Engagement particularly with government increased
during the COVID pandemic, for example to define a
safe working environment for trades. The HomeServe
Foundation now regularly engages with the UK
government to build apprenticeship opportunities as
the economy emerges from the pandemic.
Strategic report
Responsible business
21
Our people, their representatives
and the communities in which
they live
We have a diverse international work force – technicians,
contact centre teams, marketers, salespeople, accountants,
lawyers and HR specialists to name but a few. We are
investing more than ever in developing our people, focusing
on key policy areas like diversity and inclusion and ensuring
that our people’s voices are heard as we deliver our plans
for growth. We encourage our people to engage in the
communities where they live and work, and support them
when they do so.
FY21 UPDATE
We helped all of our
office-based staff to work
comfortably and safely from
home, and kept our offices
open for those who were
unable to do so. As a result,
productivity remained
strong throughout
the pandemic and our
employee engagement
scores remained high.
Financial community
We maintain a regular dialogue with current and prospective
shareholders and the wider investment community to
make sure they have sufficient information and contact to
drive investment decisions. We invest time in our banking
relationships and with our financial markets advisors.
Underwriters and other
key suppliers
The firms who underwrite the short-term cost of our
Membership repair network are key suppliers, protecting our
business from short-term claims volatility and enabling us to
always do the right thing for our customers. We will continue
to manage these and other key supplier relationships
carefully and review them regularly.
Regulators, government, opinion
formers and influencers
We maintain active relationships with our regulators and will
build our relationships with government, opinion formers
and influencers as our business grows.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 22 Strategic report
Responsible business
Our approach to responsible business has four pillars. We are developing
measures and targets for each.
Delivering for our customers
Customer dissatisfaction
5.5%
Building the workforce of the future
and treating our people responsibly
Employee engagement
78%
FY21 CASE STUDY
Product Management - HomeServe Spain
We have a full and robust process for managing products
from design to in-life performance and revision, and
through to retirement. This follows a “review and adapt”
approach to assess whether products are meeting
stakeholders’ needs and focuses on three core elements:
improved customer experience (great products and
great customer service); value to our partners; and strong
commercial performance.
We conducted a review of product value from a
customer perspective with our partners in FY21. As a
result, additional appliances are now included in one of
our products and for another, restrictions on the age of
products that are covered have been removed. In both
instances these enhancements were made without
additional cost to our customers. Furthermore, the review
helped inform the training we provide to sales channels,
improving consistency and customer experience.
Governance
Each business has a Board appointed committee, chaired by
a Non-Executive Director, which is responsible for providing
oversight and challenge on matters relating to culture, the
customer and laws and regulations.
Each committee has developed a customer KPI dashboard to
help assess the quality of service provided to customers and
whether the business is meeting its Customer Promise. The
metrics tracked vary from business to business but typically
cover customer satisfaction; quality of service; product
values; early cancellation rates; claims repudiation rates; and
complaints.
Call recording and screening
Sales, claims and complaints calls, are wherever possible
recorded and subject to formal call screening processes.
Where a call is assessed as having failed to meet the expected
standard of service, the customer is re-contacted and the
agent is provided with formal feedback and coaching.
Compliance function
Each business has a compliance function which provides
advice to operational management on customer and
regulatory matters and undertakes monitoring activities.
Delivering for
our customers
At HomeServe, the customer is at the
heart of everything we do. Customer
satisfaction drives retention and
retention drives revenue, so strategy
and responsible business are aligned.
Membership businesses
Customer centricity is about having great products and
service, technology that supports and enhances the
customer experience, effective customer feedback processes
and decision making processes that take the impact on the
customer into account. We take great care to work only
with third parties and partners who share our passion for the
customer and we monitor their performance to ensure they
deliver to the same high standards we expect of ourselves.
The Group has adopted a customer governance framework
with which each Membership business must comply.
Each business is required to complete a detailed annual
questionnaire on compliance with the framework, the results
of which are reported to the Audit & Risk Committee. Each
questionnaire is signed off by the business unit’s CEO, with
whom ultimate responsibility for customers rests.
North America Customer Promise,
Chattanooga
UK Customer Promise,
Nottingham
HomeServe plc Annual Report & Accounts 2021 Strategic report
Responsible business
23
Using our skills to support
communities we touch
Volunteer days allowance where appropriate
2 per year
Participating in the transition to a
lower carbon future
Target:
A carbon reduction pathway of 1.5
degrees by 2030 (Scope 1 and 2 emissions)
FY21 CASE STUDY
Customer First – HomeServe UK
In 2020
CustomerFirst
1,500
3,622 submissions
through to CustomerFirst
of our People sent
We spent
£75k
helping 500 Customers
in need with a free repair, job or policy
500
Customers
have been referred to agencies
Our people quote
CustomerFirst
as an employee benefit
on Glassdoor reviews
Customer Feedback
Obtaining relevant and timely feedback from our customers
is key to ensuring we deliver great service to our customers
and continue to do so.
FY21 CASE STUDY
Customer Week – HomeServe France
For the last three years, HomeServe France has run an
event dedicated to our customers – Customer Week. It is
designed to let our customers see what goes on within
our business, and for our team to meet our customers
face to face. It is a wonderful way to create commitment.
In 2020, because of the COVID pandemic, we had to re-
invent our event – 100% digitally and with 100% care!
Even though we could not have our customers participate
in person, we involved them in the preparation for the
event so that the voice of our customers could be heard
clearly.
Measurement
Customer satisfaction surveys are used by each Membership
business to assess the level of dissatisfaction with our
quality of service at at least three touchpoints: sales, claims
handling, engineer/contractor work at customers’ homes.
Dissatisfaction is considered to have occurred should a
customer score the quality of our service at three or below
out of ten. These scores are turned into a percentage. The
customer dissatisfaction target is incorporated into senior
executive and management bonus schemes.
FY21 CASE STUDY
Voice of the customer – HomeServe North
America
During the year we broadened and enhanced the
activities of the Voice of the Customer (VOTC) Committee.
We now consider a broader set of customer centric
metrics from a greater range of sources, which provides
greater insight from the customers’ viewpoint and allows
us to better understand opportunities to improve the
customer experience.
One of the early benefits of using the broader set of
data has been identifying and addressing an issue with
rejection of claims by contractors, which typically results
in delays. Whilst the average level of such rejections
has remained fairly constant, the increased size of our
business means that the number has increased from the
low hundreds to thousands. Details of contractors with
concerning rejection rates were passed to our contractor
management team, who worked with them to understand
the reasons and improve performance, or alternatively,
find other contractors in the area to take on more work or
join our network.
Incentive schemes for front line staff
Incentive schemes for front line staff are designed to
encourage the right behaviours, in particular the delivery
of great customer service. Whilst such schemes do include
commercial targets, quality of service is the primary driver
and agents only receive payment if the quality threshold is
exceeded.
HVAC and Home Experts
All businesses have a strong focus on the customer, but, with
the exception of HVAC in the UK, have yet to fully implement
formal governance processes which meet the principles of
the customer and customer regulatory framework.
During the year, a customer and legal framework specifically
for Home Experts businesses has been developed. This
recognises the different regulatory environment in which
these businesses operate but does follow the same core
principles: commitment to great customer service; a customer
promise articulating commitment to both members (trades)
and consumers; compliance with laws and regulations; and
formal oversight and challenge. The Home Experts businesses
will be implementing the requirements of the framework over
the next 12 months.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 24
Strategic report
Responsible business
Building the workforce
of the future and treating
our people responsibly
We aim to build a workforce that is skilled,
adaptable and future focused, to enable our
business to grow. We know that if we take care
of our people, our people will take care of our
customers and our business.
We want to be an employer of choice in every market, town
and city where we operate, from Walsall to Chattanooga, to
enable us to attract, recruit and retain the best people. We
build our businesses on strong foundations, championing
human rights, equal opportunities, diversity and inclusion.
We invest in learning and development for all, and support
wellbeing, Health & Safety. We pay fairly.
Our culture is built on our core values: courage, persistence
and integrity.
I lead with Courage
I believe in our strategy, keep things simple and strive
for great results and continuous improvement.
I am decisive, speak my mind and confront
challenges.
I value innovation, “failing fast” and learning from
experiences.
I lead with Persistence
I work hard, do my best, take responsibility and am
accountable for delivering results.
I am optimistic, have a “can do attitude”, choose
action and make things happen.
I am resilient when faced with setbacks, collaborate
and find solutions.
I lead with Integrity
I am honest, act with integrity and seek the truth.
I value open communication and debate and listen
respectfully to challenges and opinions.
I act with humility and openness and embrace diversity
to build great teams.
Our people strategy is overseen at Board level by the People
Committee, informed by the International People Forum,
which is made up of employee representatives from across
our businesses.
In FY21, we refreshed our people-related policy suite and
our Code of Business Conduct which apply across the
Group. The new Code sets out the standards of behaviour
expected across all employees and workers and echoes the
importance of acting in ways that support our values and
purpose. The Code is underpinned by a number of policies
and sets out clear guidance on matters such as conflicts of
interest, the use of personal data, use of company property
and equal opportunities.
The Code of Business Conduct and some of its supporting
policies can be found at www.homeserveplc.com/who-
we-are/governance/policies. They principally cover the
following:
• Policies to uphold our reputation – financial crime
and sanctions; bribery and corruption; fraud; money
laundering
• Protecting our interests and assets – confidentiality and
information security
• Protecting our people and environments – equal
opportunities, inclusion and diversity, human rights,
modern slavery
• Protecting our customers
• Health & Safety
• Whistleblowing.
FY21 highlights
Across the year HomeServe employs c.7,400 people globally,
with about 41% of these being based in the UK, 28% in the
US and 31% in Continental Europe. Over 6,600 people are
employed in our Membership and HVAC businesses and
around 800 in our Home Experts businesses - Checkatrade,
Habitissimo and eLocal. We directly employ c.1,000
engineers.
Since March 2020 the majority of our employees have been
working from home. We know that many of them are not
used to working remotely and we took steps to help them
cope with this dislocation and retain their sense of being part
of a team, and connected with the HomeServe family and its
purpose and values. We concentrated on business continuity,
making it safe for essential staff, such as water and gas
engineers, to keep working. We did so with strict protocols to
protect everyone’s physical and psychological safety, such as
personal protective equipment, distancing regulations, and
health checks.
Across our business we intensified employee support,
including conducting employee pulse surveys, providing
emergency paid leave, virtual doctor services and flexible
working hours to support parents, and implementing
well-being programmes. Employees can also access
free counselling for professional help to manage anxiety
and worry. We want to ensure that we retain a sense of
community across our organisation and our employees have
the right support in place, from HomeServe and from each
other, to take care of themselves and their loved ones. We
also enhanced our flexible working arrangements to support
our people as they adjusted to working from home and
delivering home schooling.
We continue to make important strides in delivering our
people strategy. The business and the Board are focused
on making HomeServe a great place to work, a place that
reflects the composition of the communities in which we
work and offers all our employees the opportunity to realise
their full potential. Specifically, we are focused upon the four
pillars of our People Strategy.
HomeServe plc Annual Report & Accounts 2021 Building an inclusive culture, by valuing diversity
at every stage of the employee lifecycle, and
establishing a clear ‘tone from the top’ on the
importance of equity in our decision making.
Continuing to evolve our employee engagement
strategy, so that we can continue to understand
the needs of our people and make HomeServe
an even better place to work.
Further developing our internal capability so that
we can create a rich talent pipeline that will fuel
the future needs of our growth plans.
Creating a performance and reward environment
that enables our most talented people to deliver
to their greatest potential, whilst at the same time
providing a fair share of our success.
Developing our Culture
HomeServe’s core values of courage, persistence and integrity
are embedded into The HomeServe Way, which defines how
we operate. These values are continually communicated
Group-wide and promoted by the Group’s management
teams to guide our employees in the way we do business,
particularly as we expand into new geographies. A virtual
Senior Leaders conference attended by over 300 people took
place in January to communicate the importance of these
values, behaviours and skills. These now play a decisive role in
our hiring, promotion and recognition activity.
We are proud of our values-led, principles driven culture. It
underpins our ability to innovate and adapt to change in all
circumstances. We care about our people, and our people
care about our business, which is shown in our employee
engagement survey, where 82% stated that they were proud
to work at HomeServe.
Employee engagement
Maintaining an engaged and valued workforce globally
remains a key priority for HomeServe as we know that an
engaged workforce leads to higher productivity levels and
better outcomes for our customers. Employee engagement
also impacts on our ability to attract and retain key talent and
is therefore crucial in our recruitment strategy. 92% of our
people told us that they believed that the company had taken
the right measures to protect employees’ health against the
COVID pandemic in May 2020.
Employee engagement levels have been strong over the past
3 years with notable progress.
Global
People
Survey
2018
Global
People
Survey
2019
Global
People
Survey
2020
Global
People
Survey
2021
Pulse
2020
Pulse
2019
71%
71%
68%
82%
76%
78%
Survey
Global Employee
engagement
In 2020 all of our main seven business units completed the
additional submission of a culture audit which is combined
with their Trust Index score from May 2020 to achieve
certification as a Great Place to Work. This was the first year
that all seven business units achieved certified status.
Strategic report
Responsible business
25
We are delighted with this result, which shows employee
engagement significantly ahead of pre-pandemic levels.
Performance and reward
During FY21 we continued on our path to building a high
performance culture.
Key to this has been the success of our new Annual
Performance Plan for the Senior Leadership team. We
believe that excellent standards of performance should be
appropriately rewarded and alongside delivering on this core
principle, the plan has created greater focus on key strategic
activity in support of our growth ambitions.
Employee engagement remains a crucial underpin to our
annual performance plans. Whilst not a bonus generating
measure, an engagement target remains as part of the
underlying rules of each plan, driving this into our culture and
setting expectations for leaders to maintain high levels of
engagement with employees.
We are committed to enabling all
employees to share in the success of the
company. To create greater opportunity
for this at all levels, this year we undertook
a review of our Global Share Incentive
Plan, One Plan. In early 2021 we doubled
the Company matching shares awarded
through the plan, now providing an equal match for every
share purchased by employees. The result has been an
increase in take-up of One Plan across the Group from
approximately 15% of eligible employees to 20%.
One Plan
Your Share in
HomeServe’s Future
Learning and development
Our ambition is to make sure that everyone’s career is
supported by learning opportunities, which includes self-
learning, attending conferences, peer-to-peer mentoring,
coaching and structured programmes.
We believe that individuals who engage in their own personal
development are more motivated, more self-aware, and fulfil
their career aspirations.
All our employees are supported by their people leaders in
regularly reviewing their personal development plans. The
way we all learn is different, so we have a number of ways to
support our people including self-directed learning solutions,
webinars, bite-size sessions and on-the-job activities. We
also support individuals in pursuing various professional
qualifications from various awarding bodies.
Talent Management
We are particularly focused on developing internal talent
and are committed to achieving a target of 70% internal
promotions for senior leadership roles. Our Group-wide talent
programmes continue to add value to our talent pipeline, and
they are now seen as prestigious and aspirational offerings for
our emerging talent. Nominations for the programmes are
made at the twice yearly talent reviews which involve a full
review of the global talent measures to assess if we have the
capacity, capability, and potential within our talent pools to
meet our future needs.
Despite the impact of the pandemic we have continued
to build on and evolve our suite of talent development
programmes, which included the launch of the Summit
programme.
In our March 2021 survey, 88% of our people globally took
the opportunity to share their feedback on topics such as
career development, culture, working environment and
reward. In this survey, 78% of our people globally told us that
they think that HomeServe is a great place to work.
In total, over 70 leaders have attended one of our flagship
programmes this year, and whilst the delivery methodology
has transferred online, the content and learning has remained
focused on developing our most promising people to be
ready to do more at the next level of leadership.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 26 Strategic report
Responsible business
Group-wide talent programme
GROUP
CEO
FORUM
SUMMIT
EDGE
LOCAL
LOCAL LEADERSHIP DEVELOPMENT
PROGRAMMES
CEO FORUM: Leadership development for our highest potential
leaders - successors to Group ExCo. 8 per Cohort.
SUMMIT: High potential Senior Leaders preparing for larger roles
- successors to Market/BU ExCo. 16 per Cohort.
EDGE: Emerging mid-level leaders preparing for more
responsibility within function - successors to Senior Leaders.
18 per Cohort.
LOCAL LEADERSHIP DEVELOPMENT PROGRAMMES:
Leadership development for all people managers, customised to
current priorities at business level - pipeline for mid level leaders.
Our most established talent programme, Edge, has been
successful in helping to promote and retain our emerging
talent, with 44% of graduates taking larger roles and over
90% of all delegates remaining at HomeServe. In addition the
programme has 42% female representation, fuelling greater
diversity for future internal appointments.
Diversity and inclusion
Making HomeServe an inclusive place to work will make us
a stronger, better business. Our priority is to ensure that the
diversity of our people reflects the societies in which we live
and work.
We take a holistic approach: making sure people feel
welcome and are treated fairly, regardless of their race,
gender, gender identity, age, sexual orientation, religion
or experience and recognising the importance of self-
identification, given the broad circumstances under which
discrimination can happen.
In recognition of these efforts HomeServe UK has become
a signatory of the Race at Work charter, has been voted Best
Place to Work for Women 2020, achieved accreditation to
become a Disability Confident Committed employer and is
now ranked in the Stonewall Workplace Equality Index.
In the last year, we have made good progress in our journey
towards gender equality where we have been working
towards 33% female representation on a combined basis
across the Board, Executive Committee and their direct
reports, which is in line with the targets of the Hampton
Alexander Review.
Our performance in the 2020 Hampton Alexander Report
was as follows. We missed the one third female target by one
appointment, and will continue to work towards it in the next
financial year.
Benchmark
HomeServe 2020
HomeServe 2019
FTSE 250 2020
Board
ExCo
22.2%
22.2%
33.2%
28.6%
10.0%
21.7%
ExCo &
Directs
30.4%
26.2%
28.5%
As at 31 March 2021, the level of female representation
amongst our Senior Leaders remained consistent at 32%, the
highest level since the measure has been tracked.
Board
ExCo
31 March 2021
31 March 2020
Female
Male
Female
Male
3 (25%)
9 (75%)
2 (22%)
7 (78%)
3 (23%)
10 (77%)
1 (10%)
9 (90%)
Senior Leaders
58 (32%)
122 (68%)
53 (32%)
111 (68%)
Total Workforce
3,388 (47%) 3,745 (53%) 3,004 (47%) 4,197 (53%)
Across the HomeServe Group, we are committed to building
a fair, inclusive and diverse culture and we are confident that
we reward jobs of equal value equitably and fairly. We were
pleased to report an improvement in our mean Gender Pay
Gap for April 2020 compared to 2019.
Entity
HomeServe Membership
Checkatrade
HomeServe UK
Mean Pay Gap
2020
2019
20.0%
21.10%
31.0%
39.60%
21.2%
22.30%
A key driver of our pay gap continues to be the balance of
women in our senior leadership roles, together with a low
volume of females in our engineer and technical roles which is
in line with national averages and which continues to ‘feed’ the
higher graded coach and managerial roles in field operations.
We are continually seeking to address these issues and we
continue to improve our gender balance, and relevant gender
pay gaps, at various levels and in various countries throughout
the business. While there is more to do on gender balance, our
efforts are being recognised.
Our new approach to senior hiring is helping to remove
unconscious bias in our recruitment process and by providing
tools and guidance to hiring managers we are increasing the
levels of diversity amongst potential candidates.
In addition, introducing a principles based approach to working
from home during 2020 has encouraged the adoption of
greater flexibility in work patterns and base locations which in
turn is supporting greater diversity in our candidate pool.
We remain committed to providing successful mentoring
schemes and development for women in leadership roles, with
50/50 nominations for our global talent programmes.
Furthermore, despite lower than usual attrition this year (largely
as a result of COVID) we have been able to ensure that in
HomeServe UK alone, almost 50% of our total management
hires and promotions were female.
We are beginning to see a tangible positive effect which,
combined with the new strategic approach we are developing
to diversity and inclusion, we intend to continue to develop and
anticipate further success.
HomeServe plc Annual Report & Accounts 2021 Strategic report
Responsible business
27
Health & Safety
When it comes to Health & Safety (H&S), HomeServe’s vision
is to operate with minimum risk in all of its undertakings.
HomeServe is committed to ensuring that there is a H&S
culture in place, underpinned by robust systems and
processes to identify risks and implement appropriate
controls to manage them. The focus is on providing a
safe working environment, safe practices, processes, and
procedures for everyone associated with the company
(employees and customers). The aim is to achieve continual
improvement in H&S performance.
David Bower, Chief Financial Officer, is the Board Director
responsible for H&S. Local HR and Operations Directors
lead H&S matters in each business and are responsible for
executing H&S policies. However, everyone is expected to
play their part in H&S excellence and act responsibly with due
regard for the safety of themselves, their colleagues and our
customers. Any new businesses acquired are expected to
apply the same focus to comply with the Group’s policies.
H&S across the Group is an area of focus within the risk
management process. The H&S risk environment is reported
to the Executive Committee and Audit and Risk Committee
three times a year as part of the wider risk update. The
Board also receives a report on Health & Safety twice a year,
highlighting key trends, issues, and achievements. The Board
reserves the right to request additional information at other
times of the year where required.
The Group Risk function works closely with H&S
representatives across the Group and best practice is
shared between the different territories on a quarterly basis.
Performance reports are collated monthly across the Group.
As a result of the COVID pandemic the Group has seen
a reduction in accident rates largely driven by lower
numbers of vehicles on the roads and limited staff volumes
in the offices. This may make like-for-like year-on-year
comparisons challenging in the future.
The effects of the COVID pandemic continue to be a key
area of focus for the Group and all businesses. Initially the
Group’s COVID response, including our approach to H&S,
was co-ordinated through a global task force to manage
the risks posed to HomeServe’s customers, employees and
business. While the initial focus was on helping staff to work
effectively from home, focus now is on getting staff back to
the office safely, as and when restrictions are lifted.
Our businesses are considering what the ‘new normal’
will look like, taking into account local requirements and
guidelines as well as considering the potential for further
waves and/or local restrictions. Premises have been adapted
to reflect the requirements of social distancing and robust
processes to protect both engineers and customers have
been put in place. Focus on employee mental health as well
as physical wellbeing has increased during the pandemic,
and this is expected to continue.
HomeServe UK
Accident frequency rates per 200k hours worked
Lost time injury rates
FY19
7.39
FY20
5.59
FY21
3.41
Trend
The business continues to see an improvement in key metrics. Lost time accidents mainly relate to manual handling so focus has been placed
on training in this area.
Checkatrade
10.96
5.77
—
No accidents have been reported in FY21.
HomeServe North America
2.08
3.44
3.11
The business has seen a reduction in accident frequency rates and lost time injury rates. During the same period the proportion of HVAC
activity increased, so focus has been on improving Health & Safety standards within locally branded businesses.
eLocal
–
–
—
n/a
FY21 is the first year where eLocal have been included within the figures and have reported no accidents.
HomeServe Spain
2.30
2.22
1.06
The business has seen a reduction in key metrics and traffic accidents have reduced considerably as a result of travel restriction and
introduction of working from home as a result of the COVID pandemic.
Habitissimo
No accidents have been reported in FY21.
HomeServe France
2.89
5.93
2.08
—
5.16
4.40
The business’ Health & Safety metrics have remained relatively stable across FY21 as a reduction in accidents in Membership has been offset by
increased activity in HVAC.
Note: The Accident Frequency Rate and Lost Time Injury Rate are recommended measures provided by the UK Health & Safety Executive. The measures are also in line with US standards
and are used across various boards in the US. The purpose is to allow for a consistent ratio regardless of the number of employees within a business. Accident Frequency Rate is the total
number of reported incidents per 200,000 employee hours worked and is calculated using the total number of reportable incidents divided by total hours worked, multiplied by 200,000.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 28 Strategic report
Responsible business
In North America, we offered much needed support to
our local communities through our HomeServe Cares
Foundation, which launched last year.
Using our skills to
support communities
we touch
206 caring for
people jobs
completed worth
$462,000
$247,700 in
grant funding
distributed to
charities
$38,000 in
grant funding
distributed to
veteran groups
76 organisations
supported and
1,229 employee
hours volunteered
At HomeServe we want to be good citizens
of the communities where we operate, so
that our people and partners are proud to be
associated with us.
In the UK, FY21 saw the launch of the HomeServe
Foundation, a registered charity supported by us and other
key partners. The Foundation’s purpose is to make homes
better and build better communities through three core
pillars of activity:
Our community activities are organised locally by
each of our businesses, to leverage local knowledge
and understanding of how best to contribute to our
communities. Although managed locally, a uniting thought
around all of our community endeavours is the importance
to people of their homes. The skills of our people and trades
enables us to help members of our communities in need
with home repairs and improvements.
• Apprenticeships: supporting and encouraging employers
to employ and train more apprentices in the construction,
home improvement and repair sector
• Communities: supporting vulnerable people to lead a
healthy, safe, and long life in their own homes
• Environment: encouraging employers to adapt to
deliver green initiatives, and promoting the benefits of
developing a green home.
In Spain, we continued to help local communities through
our HomeServe Responde programme, the main objective
of which is to take care of the homes of those in the
community most in need in as many ways as possible. This
last year employee volunteers: repaired and renovated foster
homes in the SOS Children Villages, donated furniture and
the equipment necessary for safe and socially distanced
living in a local charity care home, and donated €12,280
to the Madrid foodbank. Engineers at our HVAC company
Sate offered free boiler repairs to the elderly throughout
lockdown. And we continued to work with the Down
Madrid foundation and the Spanish Cancer Association.
Throughout the year our UK employees ran a variety
of virtual fundraising events, which raised £38,000 for
our chosen team charities. This year we also became a
Cornerstone Employer, partnering with The Careers and
Enterprise Company, to support young people preparing for
the world of work.
In France, we renewed our partnership with Habitat &
Humanisme for the sixth year. Our engineers carried out six
free repairs to social housing, and our people raised €4,748
through a variety of socially distanced events including, a
sponsored kilometres challenge, and a Christmas jumper
competition. The “BOOST!” programme ran for its third year,
and funded 10 employee projects, the total investment of
which amounted to €14,000. In response to the incredible
efforts and sacrifices of healthcare staff during the COVID
pandemic, we offered free repairs to all healthcare staff
during May.
At Checkatrade we elected Samaritans as our company
charity of the year, and set ourselves the challenge of raising
£10,000 in a year. Half-way through and we have fundraised
over £5,000 through step challenges, virtual group
workouts, Christmas home decorating, and beard growing
competitions. Of the money raised so far, Samaritans have
said that Checkatrade has helped them answer 912 calls
from people struggling to cope.
HomeServe plc Annual Report & Accounts 2021 Strategic report
Responsible business
29
“The nice thing is, HomeServe gives us the ability to go
above and beyond for the customer and fix things right,
which is not the case with a lot of warranty companies,
which is why we refuse to work with a lot of them.
HomeServe authorizes the repair that is best for the
customer and they pay their contractors enough to fix
things correctly, which is rare among warranty companies,”
Jason Parlier, owner of Johnco Plumbing in Phoenix,
Arizona, said.
Contractors value their partnership with HomeServe,
because the company puts the customer at the heart of
what we do, allowing our network contractors to happily
follow suit.
“One thing about HomeServe, they seem to cover a lot
of the things that other companies won’t cover. I’ve had
nothing but great experiences with HomeServe. I think it’s
a great partnership. I love the organization and I’m glad I
said yes,” James Henderson, owner of Houdini Plumbing in
Stafford, Texas, said.
FY21 CASE STUDY
In February, a once-in-a-decade polar vortex slammed
the state of Texas, causing unusually bitter cold
temperatures.
The record-low temperatures caused lengthy electricity
blackouts across the region and impacted homeowners’
plumbing. Many experienced frozen water pipes inside
and outside their homes and, as temperatures moderated,
those once frozen lines poured water into their homes.
Dallas-Fort Worth-area provider Crawford Services, a
locally branded HVAC and plumbing company acquired
by HomeServe in December 2019, saw a soaring number
of calls because of frozen water lines. Despite the staff’s
own personal struggles – several technicians and their
families took temporary shelter at the company’s depot,
which retained power – technicians prioritised emergency
water and heating needs of customers.
The company was so busy and plumbing supplies so
short that their sister company, Hays Plumbing, another
locally branded company acquired by HomeServe in
June 2020, made an emergency delivery of common
plumbing supplies, making a 16-hour, more than 2,000-
mile round trip from their location in the Phoenix, Arizona,
area to Crawford’s location in Texas.
“When we heard about the problems in Texas, our
hearts went out to the people struggling down there.
We heard about the need for plumbing supplies and we
knew we could help. It was a long drive, but it was worth
it to do our part,” said Chris Hays, Hays Plumbing General
Manager.
Together with the 24 out-of-state contractors who came
to Texas to make repairs for our members, this is a great
example of how we can rely on our service network to do
the right thing for our customers.
Relationships with contractors
Providing highly qualified contractors who deliver a great
customer experience is at the heart of the HomeServe
business model.
“The customer is at the heart of everything we do, so it’s
incumbent on us to get the best contractors to show up
at their door,” Sylvester Criscone, Senior Vice President
of Contractor Management for HomeServe North
America said. “It’s why we do the vetting, it’s why we track
the quality of the jobs, monitor them in real time and
communicate with the contractor about their performance.
It’s what distinguishes HomeServe from any other home
warranty company out there today.”
Because of this, only 10% of contractors in the plumbing,
electrical and HVAC trades researched and vetted through
a comprehensive multi-step process are accepted into
HomeServe’s network.
To start, a prospective network contractor must have a Better
Business Bureau rating of A or better, along with proper
licensing and insurance. They must employ uniformed
technicians who pass both a background test and drug
screening, operate branded, insured vehicles in good
condition and be able to offer 24/7 emergency service.
A contractor who has passed this initial phase of recruitment
will be interviewed by the HomeServe contractor recruiter to
ensure that the contractor will be able to meet HomeServe’s
standards for service.
Once a contractor successfully passes through this vetting
process, they must sign an agreement with HomeServe
that establishes performance standards and a code of
ethics before they can begin to accept jobs and service our
customers.
A Regional Operations Manager (ROM) is assigned to a
contractor and tracks their performance, with an emphasis
on customer satisfaction metrics. ROMs are responsible for
tracking performance, compliance and customer satisfaction
and conduct onsite audit visits.
“Vetting our contractors is an area of focus for us,” Criscone
said. “We ensure that they are licensed and have proper
insurance. We use a respected third-party administrator,
who provides alerts when licenses and insurance policies
are set to expire.”
HomeServe contractor recruiters work through multiple
channels to find contractors across the country, with
particular emphasis on recruiting minority women, and
veteran-owned contractors. HomeServe benefits the many
small businesses who partner with the company.
“Our job volume gives contractors consistent and sustained
business that helps them stay busy when their own volume
of work may be slower,” Criscone said. “It also gives them
leads on additional work – when they go into a customer’s
home, there may be work that a customer needs doing
unrelated to the policy or they become a trusted contractor
the customer relies upon because of their policy work
through HomeServe. It’s truly a win-win relationship.”
HomeServe’s network contractors praise the company for
supporting them in performing the necessary repairs and
providing a great customer experience, in contrast with
competitors.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 30
Strategic report
Responsible business
Participating in the
transition to a lower
carbon future
Strategy
Governments and corporates globally are facing up to the
challenge of climate change. The countries in which we
operate have either signed up to Net Zero carbon emission
targets, or are in process of doing so. This includes the
UK and France, where Net Zero targets are enshrined in
law. Within this context, the residential sector – and by
consequence the market segments we serve – will be
core to delivering this decarbonisation effort. We already
see a strong policy focus, as well as growing demand
and adoption by households of low carbon solutions and
behaviours – from electric vehicles to renewable energy and
smart home energy management.
We want to be the place our customers turn to for the
solutions needed to make this change.
We aim to participate in and enable the Net Zero
transition by:
• Making our own house greener - reducing the impact
of our operations, supply chain and customer solutions
through operational excellence, collaboration and
innovation
• Helping our customers make their homes greener -
reducing their environmental impact by offering attractive
solutions.
Policy and Targets
During the year, the Board approved a Group Environment
Policy and this is available on our website at:
www.homeserveplc.com/who-we-are/governance/
policies
The Board has agreed that we should set an ambitious
science-based target, aligned with a 1.5°C trajectory, for our
Scope 1 and 2 emissions. This target is a 42% reduction by
FY30 from a FY20 baseline. We have identified a number of
actions we will need to take to achieve this. These include:
• All offices procuring renewable electricity by 2030
•
Implementing energy efficiency measures in our facilities
(such upgrading cooling systems)
• Transitioning as much of our fleet to electric vehicles as
possible.
We are in the process of working through these actions with
our operating businesses and have already taken steps to
reduce energy usage by installing automatic light sensors and
replacing office and outside lighting with LED alternatives.
Risks and opportunities
Our climate related risks are described in our Principal risks
and opportunities on page 33. Our expectation is that
these will be further developed as we work through the
requirements of the Task Force on Climate-related Financial
Disclosures (TCFD).
We believe that the Net Zero transition will create multiple
opportunities for us to support our customers improve their
homes and adopt solutions that will create value for them
as well as reduce their climate impact. We are currently
developing and testing a number of products and services.
These include the installation and maintenance of electric
vehicle charging points and the installation of more energy
efficient HVAC equipment.
Governance
The Board has ultimate responsibility for our Environmental
Policy and performance. David Bower, CFO, is the nominated
Director for activity on an operational basis. He is supported
by the newly formed Group Corporate Responsibility
Committee which is chaired by the Chairman of the Board
and comprises representatives from our operating businesses
and from a number of Group functions. The Committee
reports regularly to the Board and in respect of risks, to the
Audit & Risk Committee of the Board.
Greenhouse Gas Emissions
We have reported on all of the emission sources required
under the Large and Medium-Sized Companies and Groups
(Accounts and Reports) Regulation 2008 as amended in
August 2013. The reporting boundary used for collation
Greenhouse Gas Emissions
Combustion of fuel and operation of facilities
Electricity, heat, steam and cooling purchased for own use (location-based)
Electricity, heat, steam and cooling purchased for own use (market-based)
Total (location-based)
Tonnes of CO2e per employee
Group
UK
Tonnes of
CO2e FY21
13,698
1,574
1,995
15,272
2.05
Tonnes of
CO2e FY20
12,028
2,402
2,817
14,430
2.11
Tonnes of
CO2e FY21
6,181
347
561
6,528
2.13
Tonnes of
CO2e FY20
7,207
909
1,340
8,116
2.39
Group
KwH FY21
KwH FY20
KwH FY21
KwH FY20
UK
Combustion of fuel and operation of facilities
59,359,630
49,873,203
26,745,195
29,793,806
Electricity, heat, steam and cooling purchased for own use
5,256,707
7,556,054
1,489,254
3,555,306
Total
64,616,337
57,429,257
28,234,449
33,349,112
HomeServe plc Annual Report & Accounts 2021
of the data is consistent with that used for consolidation
purposes in the financial statements. To calculate the
disclosures, we have used the following sources; the GHG
Protocol Corporate Accounting and Reporting Standard
(revised edition), data gathered to fulfil our requirements
under the CRC Energy Efficiency scheme, and emission
factors from the UK Government’s GHG Conversion Factors
for Company Reporting 2014.
Both our FY20 and FY21 Scope 1 and 2
carbon footprints have been verified by The
Carbon Trust to the ISO 14064-3 standard.
Moving forward
We are currently in the process of assessing and verifying our
Scope 3 emissions and intend to be in a position to report on
them next year.
We are aware that the requirements of the Taskforce on
Climate-related Financial Disclosures will apply to us from
FY22 and we are actively working through the framework in
order to report in accordance with it next year. We are also
preparing to report to CDP for the first time in 2021.
Emissions Breakdown
Scope 1 and 2 carbon footprint (market-based)
Scope 2
13%
Scope 1
87%
Scope 1 emissions
broken down by source
Scope 2 emissions
broken down by source
(market-based)
Natural
Gas
8%
Diesel
41%
Petrol
51%
Spain
8%
UK
28%
France
2%
US
62%
Strategic report
Responsible business
31
FY21 CASE STUDY
Relationships with regulators – North America
Our North American business has a strong culture of
compliance to ensure that we adhere to all applicable
federal and state laws and regulations. As the business
has expanded across the United States, so too has
our understanding of the regulatory landscape. This
is especially important since we now operate in 48
continental states with each having its own unique set of
requirements. In addition to all the standard state licensing
and registration requirements in each of the Departments
of State and Insurance, our US based team keeps a close
eye on legislative and regulatory activities that might
impact consumers and our partnerships with investor
owned and municipal utilities.
Within each state, the office of the attorney general has,
among other duties, consumer protection oversight.
Like other businesses operating nationally, HomeServe
has joined trade associations that represent attorneys
general to stay up to date on issues of common interest
and to educate them and their staff on our business, and
commitment to delivering on our customer promise. Over
the last eight years, the company has had the opportunity
to meet with many current and former attorneys
general and their staff. These meetings have been
instrumental in ensuring that our product propositions and
communications across all channels incorporate the very
best compliance practices. We believe that continuing to
engage in dialogue with this important stakeholder group
will ensure continued high levels of compliance and
customer satisfaction, which are inextricably linked to the
success of our business.
One key to our growth in North America is partnering
with energy utilities to access larger numbers of
households that could benefit from our products.
Investor-owned utilities are regulated by state level public
utility commissions (PUCs). Like the attorneys general,
the public utility commissioners and staff also participate
in their own national associations that provide industry
participants like HomeServe a forum for engagement. The
company has been increasing its focus on PUCs in recent
years, starting by attending association events to learn,
engaging former commissioners as advisors, and meeting
with individual commissioners and staff to discuss our
programs within their states. These initiatives combine to
help PUCs understand how our programs benefit utilities,
their customers, and the communities they serve. During
FY21, the business expanded this focus by adding its first
in-house regulatory counsel, the former chief of staff at
the New Jersey Board of Public Utilities.
The energy utility landscape is continuing to evolve
towards a more environmentally friendly future where
decarbonisation, electrification and energy efficiency
initiatives are more important than they have ever been.
HomeServe has an opportunity to increase its value to
these utilities as a partner in meeting their goals. This
will make engaging and building relationships with state
regulatory bodies more important and we are positioned
to do so from a strong foundation.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021
32 Strategic report
Principal risk and uncertainties
Principal risk and uncertainties
Risk framework
HomeServe has a robust risk management framework
which encompasses the Group’s Risk Policy and overall risk
appetite. The framework utilises the three lines of defence
model which is recognised as best practice across the
industry. It provides a disciplined and consistent approach
across all of HomeServe, ensuring a structured response
at all levels throughout the Group and across all businesses
and geographies.
This structured approach is aimed not only at monitoring
and mitigating identified risks but also aims to capture and
escalate emerging risks and opportunities. The effectiveness
of this approach was demonstrated in HomeServe’s response
to the pandemic, with a rapid move to home working for all
office based staff and initiatives in the field to ensure a safe
continuity of service for HomeServe’s customers.
Plc Board
Audit & Risk Committee
Executive Committee
Three scheduled risk discussions per annum
• Risk discussion chaired by the CFO
• Composed of Executive Directors and representatives from each Group business
• Discussions are reported on at the Audit & Risk Committee.
Line 1
Business Unit Operations
Line 2
Risk, Control & Compliance
Functions
Line 3
Independent
Internal Audit & Assurance
• Review 1st and 2nd lines
•
Independent testing &
challenge & oversight of
Lines 1 & 2.
All front line and support
functions
• Lead day-to-day risk
management
• Maintain local Risk
Registers
• Own and operate
processes and mitigating
controls
• Undertake quality
assurance activities and
provide appropriate
training.
Including Financial Control,
Information Security, Risk
Management, Legal and
Compliance
• Oversee & challenge risk
management
• Monitor and test risk
systems & controls in the
1st line
• Review & challenge
incident management in
the 1st line & develop Risk
Management framework
• Provide risk MI to
governance committees.
Other
External
bodies e.g.
External
Audit,
Regulators
S
Strategic risks
O
Operational risks
F
Financial risks
HomeServe plc Annual Report & Accounts 2021 Strategic report
Principal risk and uncertainties
33
Changes in FY21
Group Enterprise Risks (“GERs”) are considered to represent
the most significant threats to HomeServe’s ongoing
strategy and operations. Risk registers continue to be
maintained at a local level in every business and are formally
reviewed by the Audit & Risk Committee at each of its
meetings together with GERs.
During the prior year, and for the first time, Sustainability
was reported separately as a GER. This reflected the
growing focus on the potential risks and opportunities of
climate change and other environmental considerations on
HomeServe’s business model. In FY21, there has been further
attention given to this issue, part of which is detailed on
page 30 of the Responsible business section. Environmental
considerations are integral to the risk frameworks managed
by each of the Group’s businesses, and the focus of the
Board on these matters was formalised during the year in
the adoption of a Group Environment Policy. The Group
notes that the requirements of the Taskforce on Climate-
related Financial Disclosures (TCFD) will apply from FY22 and
intends to use its disclosures under this framework to report
its progress. As such, Sustainability is no longer reported
separately as a GER.
During FY21 a new GER was introduced regarding the
potential to fail to deliver the desired level of strategic
growth. This risk is being mitigated by proactive planning
on which opportunities to target resources and attention,
thereby ensuring focus and that individual businesses pursue
avenues for growth consistent with the appetite of the
Group.
During FY21 the risk management framework was enhanced
further as the Group identified a number of risks whereby
failures in any one of the business units would result in a
change in the risk environment at a Group level. As such,
these risks are deemed critical to the success of the Group.
For these critical risks, compliance with a minimum control
level set at the Group-wide level is deemed non-negotiable.
The Group risk team operate an approach for these risks that
encourages the sharing of best practice across the Group to
strengthen the overall control framework. The critical risks
identified are detailed below:
• Health & Safety
• Data Protection
•
Information Security
• Customer Culture and Regulation
• Financial Misstatement
• Corporate Governance.
Risk Appetite
In accordance with the Group’s Risk Management Policy,
the Group’s risk appetite is subject to an annual review of its
definition, content and criteria for assessment scores.
HomeServe’s risk appetite is comparatively low, recognising
firstly, our status as a plc which requires strong governance
and reputation, together with delivering returns for our
shareholders and, secondly, our regulated status which
requires compliance with local laws, rules and guidance.
Risks are assessed at a local level on a gross basis using a
matrix approach, to score likelihood and impact, and on a
net basis after considering any mitigations which have been
applied.
Brexit
Brexit has never featured as one of HomeServe’s enterprise
risks, but it continued to be monitored at a local and a Group
level up until the end of the transition period on 31 December
2020. The Group notes the Trade and Cooperation
Agreement reached between the UK and the EU at the end of
2020. Although the full range, scale and timing of outcomes
of the UK leaving the EU continue to be somewhat uncertain,
as expected, the impact on the underlying performance of the
Group has, to date, been limited and is expected to remain so.
COVID pandemic
Through FY21, trading in the Group’s Membership businesses
remained very resilient against the backdrop of the COVID
pandemic, with the Group retention rate increasing compared
to FY20. The initial impact of stay-at-home restrictions on the
Group’s Home Experts businesses was more pronounced,
with the core customer base – tradespeople providing largely
non-emergency services – unable to access homes, and
therefore work. However, whilst the Group’s territories have
subsequently seen further rolling stay-at-home restrictions
since the initial lockdown measures of spring 2020,
tradespeople have been able to access homes to perform
non-emergency services. Coupled with this, consumer
demand in the Group’s Home Experts businesses returned
very strongly through summer 2020 and onwards.
Nevertheless, uncertainty related to the future course of the
pandemic, and indeed future public health crises, remains an
area of focus. With respect to the current COVID pandemic,
due to differences by country in impact and restrictions, the
risk and response is being managed locally with consideration
on the specific risk environment for each business. Any impact
seen is then reported to both the Executive and Audit & Risk
committees.
Group Enterprise Risks
The following table sets out what the Board believes to be
the principal risks and uncertainties facing the Group, the
mitigating actions for each and, where applicable, updates
on any change in the profile of each risk during the past
year. All risks carry equal importance and weighting for the
Board, however additional focus and priority may be given
to specific risks for a period of time in certain circumstances
e.g. following a material acquisition or to implement plans to
reduce any risk which exceeds the appetite threshold.
The Board’s assessment of risk appetite is guided by our
vision to become the world’s most trusted provider of home
repairs and improvements and by our purpose to make
home repairs and improvements easy. HomeServe’s values
reflect our commitment to our customers, our people, to
innovation and integrity and being the best at what we do.
The principal risks and uncertainties should be read in
conjunction with the Operating review and the Financial
review. Additional risks and uncertainties of which HomeServe
is not currently aware or are believed not to be significant
may also adversely affect strategy, business performance or
financial condition in the future.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 34 Strategic report
Principal risk and uncertainties
Strategy
1
2
3
Strategy elements
MEMBERSHIP & HVAC – NORTH
AMERICA
The best products to match customer needs to trades
Generate repeat and recurring revenues
MEMBERSHIP & HVAC – EMEA
Invest in partnerships, marketing, technology and innovation
Attract and retain more customers, trades and partners
HOME EXPERTS
Develop the world’s largest trades network
Risks
S
F
Strategic risks Operational risks
O
Financial risks
Movement
Increased risk No change
Reduced risk
Overview
Mitigations
FY21 update
Movement
The Group observes increased activity by Google,
mainly in North America, in the Home Experts space.
The impact of players like Google is already
documented within the risk registers of our Home
Experts businesses.
1 Competition S
In all of our business lines a successful new
entrant or an existing competitor adapting
more quickly to changing customer
demands and needs could adversely impact
our business and our financial results with
lower customers, retention rates, revenue
and profitability.
Competitors with active M&A programmes
could also show interest in HomeServe’s
targets, leading to missed opportunities or
over-paying.
Competitive threats today include, but are
not limited to;
• Utilities running Membership
programmes in-house
• Adjacent products e.g. Whole Home
Warranty
• Existing competitors moving into other
geographies
• New entrants e.g. Amazon or Google
investing heavily to enter the home
services space with new products or
technologies
•
Incumbent competitors to Home Experts
in the UK e.g. Rated People, MyBuilder
We demonstrate to utilities
that they can benefit more by
partnering with HomeServe due
to our long-term investment
horizon.
Regular market reviews in each
business identify new entrants
and increases in competitor
activity e.g. aggressive pricing
initiatives.
Agile product development
responds to changing consumer
needs. Shared learning between
our markets, analysing consumer
trends and developing leading
products and services.
We believe we have the
winning Home Experts model
in Directory Extra, which
Habitissimo has recently
followed Checkatrade in starting
to implement. Continued
learning and idea-sharing
happens between our Home
Experts businesses, which are
liaising more frequently with
our Membership businesses to
develop the range of services
that customers want and the best
means of accessing them.
2 Information security & cyber resilience S
In line with other businesses, HomeServe
is subject to the increased prevalence and
sophistication of cyber-attacks, which could
result in unauthorised access to customer
and other data or cause business disruption
to services.
A successful cyber attack might have a
significant impact on reputation, reducing
the trust that customers place in HomeServe
and could lead to legal liability, regulatory
action and increased costs to rectify. A lapse
in internal controls and a subsequent data
breach or loss would have a similar impact.
Total customer numbers and policy retention
rates may reduce and partners may terminate
affinity relationships if they perceive customer
data to be at risk.
3 M&A strategy S
HomeServe has an active M&A strategy
focused on two primary areas; Membership
policy books and a buy-and-build strategy to
grow the HVAC business line.
There is a risk HomeServe could overpay
for transactions or underestimate the time
and resource required to integrate new
businesses, potentially leading to lower
than anticipated cash inflows and revenue,
increased costs, reduced profitability and an
increased likelihood of impairment.
By contrast, a successful M&A strategy should
diversify risk by, for example, introducing new
partners and channels, increasing profitability
and should lead to increases in KPIs such as
customers and policies.
HomeServe has a number
of defensive and proactive
practices across the Group
to mitigate this risk. There is a
detailed Information Security
Policy, which is communicated
across the Group and training
is provided as required. Regular
penetration testing is in place
to assess defences and
HomeServe continues to
invest in IT security, ensuring a
secure configuration, access
controls, data centre security
and effective communication of
policies and procedures to
all employees.
Cyber continues to be a key area of focus for the Group
with emphasis on both maintaining and increasing
the maturity and capabilities of our controls and
countermeasures. A single team was created during
FY20 to bring together those people with a primary
cyber security responsibility, who had previously
operated with a degree of independence within
individual Group businesses.
The continued arrangements at the time of writing
whereby a substantial number of the Group’s
employees are working from home, and the
likely permanence with which “hybrid” working
arrangements are adopted in future has seen a
number of the Group’s businesses increase their
scoring of this risk.
Strict criteria when building a
prospects pipeline.
Independent advisers engaged in
due diligence processes.
There has been increased HVAC M&A expenditure this
year (see note 16) but no change to the underlying risk.
All acquisitions continue to be appraised by dedicated
M&A teams, and transactions approved by local and/or
Group Board.
After pausing at the initial onset of the pandemic in
spring 2020, the Group’s HVAC buy-and-build strategy
recommenced during the summer of 2020. We note
some increased competitive activity in this space,
particularly from private equity purchasers, and retain
an even keener focus on valuation multiples.
Strong track record and
experience of acquiring and
growing policy books.
Local management expertise
with oversight from central plc
function.
Clear investment hurdles and
completion of post-investment
reviews.
All investments require local
and, where applicable, plc Board
approval.
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HomeServe plc Annual Report & Accounts 2021
Strategic report
Principal risk and uncertainties
35
Overview
Mitigations
FY21 update
Movement
4 Underwriting capacity & concentration O
The Membership business line markets and
administers policies that are underwritten by
independent third-party underwriters. HomeServe
acts as an insurance intermediary and does not
take on any material insurance risk.
With the exception of the UK, at
least two underwriters share the
policy books in each country.
In the UK, HomeServe maintains
relationships with a number
of other underwriters who are
willing and able to underwrite the
business.
Regular (at least 6 months)
reviews with all underwriters
to ensure that current product
performance and trends are
understood.
All our underwriting relationships remain strong,
with regular engagement during FY21.
The two largest underwriters across the Group
(Aviva and Amtrust) are in a strong financial
position, and, as expected, all our underwriting
relationships have remained strong during the
pandemic.
With the increased amount of time spent in
homes across our Membership territories due to
measures to control the pandemic, we continue
to monitor the impact this is having on customer
behaviour.
These arrangements are a core part of the
Membership model and help protect HomeServe
from short term risk e.g. of rising claims costs or
frequencies.
Seeking new underwriters and obtaining relevant
regulatory approvals may take time, leading to
business disruption.
Lack of suitable underwriters could force
HomeServe to underwrite policies in-house,
exposing it to material insurance risk.
A material change in the operating model would
also drive a change in accounting policy that
could affect short term profitability. Customer
numbers and retention rates may fall if customers
experience reduced service levels or are not
covered throughout any period of disruption.
5 Regulation O
HomeServe is subject to regulatory requirements
relating to e.g. product design, marketing materials,
sales processes and data protection.
HomeServe believes that regulation has a positive
impact and encourages a culture that promotes
customers’ interests and will improve HomeServe’s
prospects over both the short and long-term.
Like many companies HomeServe is also subject to
wider regulation concerning e.g. anti-corruption,
anti-fraud and bribery, modern slavery etc. Specific
policies can be found at www.homeserveplc.
com/who-we-are/governance/policies
Failure to comply with regulatory requirements in
any of its countries could result in the suspension,
either temporarily or permanently, of certain
activities.
Much regulation is intended to protect customers
and failure to adhere to the high expectations
customers have for HomeServe could lead to
reduced retention and higher customer losses. In
addition, legislative changes relating to partners
may change their obligations with regard to the
infrastructure they currently manage and hence
the products and services HomeServe can offer to
customers. It is possible such legislative changes
could reduce, or even remove, the need for some
of HomeServe’s products and services.
6 Digital transformation O
As distinct from technology investment (below)
digital transformation relates principally to
interactions with customers (be they homeowners
or trades), ensuring we offer a multi-channel,
multi-media approach to interact with them and
that we do so in an efficient and cost-effective
manner.
If HomeServe is not flexible enough to respond
to changing needs, customers may explore
competitor products and choose not to renew.
There is also a reputational risk as complaints
logged via social media can quickly escalate if not
dealt with in an appropriate and timely manner.
In the UK, the FCA published its final report
analysing pricing practices across the general
insurance industry. HomeServe is out of scope of
the main remedy requiring pricing parity between
returning and brand new customers.
The FCA continues to be active in seeking optimal
outcomes in the interests of consumers, and
HomeServe maintains regular dialogue with the
FCA to support these aims. One example was an
exercise undertaken during the year to re-contact
customers regarding disclosure of prior year
prices on written communications, to ensure
these were sufficiently prominent.
There has been no material change in the
regulatory environments in which our other
businesses operate.
Compliance with local
regulation as a minimum to
ensure products are designed,
marketed and sold in accordance
with all relevant legal and
regulatory requirements and
that the terms and conditions
are appropriate and meet the
needs of customers.
Best practice shared across the
Group.
Regulatory specialists,
compliance teams and Non-
Executive Directors in each
business.
HomeServe maintains regular
dialogue with the FCA in the UK.
In North America, there is regular
contact with the Attorneys
General.
In Home Experts, a chief technology officer
has been recruited to develop requisite system
enhancements across the Home Experts
businesses.
HomeServe continues to review
and respond to customer
comments and needs and
customers are offered a number
of channels through which they
can engage with HomeServe:
telephone, website, digital live
chat, paper, email and social
media.
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STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021
36 Strategic report
Principal risk and uncertainties
Overview
Mitigations
FY21 update
Movement
7 Technology Investment O
As distinct from digital transformation (above),
this risk principally relates to investment in the
key systems the Group relies on to manage its
daily operations.
Appropriate and timely maintenance and
investment is required to ensure systems
continue to meet the changing needs of the
business and its customers.
Home Experts, particularly Checkatrade,
is well progressed with a programme of
transformation to ready the business for its
ambitious growth plans.
Failure in back office systems may lead to
business interruption and lack of investment
to provide timely and appropriate data could
jeopardise the ability to analyse performance
indicators and react to any trends.
Over-investment in any new initiatives could
see investment outweigh future benefits and
lead to impairment.
All decisions are subject to
the Group’s strict investment
criteria and hurdles. Major IT
programmes are allocated
specific governance structures
and oversight with members
of senior management sitting
on the Programme Board.
HomeServe engages a number
of external advisers on large
software projects to provide
appropriate breadth and depth
of experience and expertise to
ensure there is no over-reliance
on any one supplier and to
support management in project
delivery.
In the UK, the eServe CRM system was fully impaired,
incurring an exceptional charge of £84.8m. eServe
was highly configured and became costly and
inflexible to implement, with further configuration
issues emerging as implementation progressed. As a
result of this customisation, the system exhibited high
operating costs and a high cost of change. During
the second half of FY21 additional capability issues
came to light as more policies were introduced onto
the system, meaning that the duration of the parallel
run period alongside the legacy system would need
to be extended. Following an extensive review of
system capability and robustness and the ongoing
operational needs of the business, the difficult
decision was taken to revert the minority of customers
on this platform back to the existing Ensura CRM
system, which is the proven system of record in North
America. Following a period of decommissioning,
eServe will be replaced by a flexible, cloud-based
solution. Current planning suggests this will be a
Salesforce solution, similar to those implemented
successfully in France and which is planned for
implementation in North America.
In France, a Salesforce CRM system was implemented
successfully, which included the migration of the
entire 1m+ customer base in August 2020.
At Checkatrade, new system enhancements to both
trades vetting and billing went live during the year.
The benefit of technology investments made in the
recent past continue to be seen in enabling effective
remote working practices for c.6,400 employees.
Integration plans form part of all
business case approvals.
A total of 24 HVAC acquisitions were made in FY21
across the US, France, Spain and the UK.
Post-investment reviews provide
learning for future acquisitions.
Dedicated teams and
resources and retention of key
management personnel in the
acquired businesses.
HVAC managed locally but
with a central global team to
coordinate and ensure consistent
application of best practice.
A portfolio of partners in each
business diversifies risk.
Partners signed on long-term
contracts with beneficial financial
terms for each party.
HomeServe seeks to renew
contracts early, ahead of any
expiration date.
Regular dialogue with all
partners, particularly in markets
with more concentrated partner
relationships e.g. France.
In North America we continued to sign new partners
at the rate of 2-3 per week. During the year we exited
relationships with some legacy partners to drive higher
returns elsewhere from the marketing expenditure.
In the UK, the relationship with Thames Water came
to an end at the close of the year, however this
relationship represented a modest proportion (<5%)
of yearly new customer adds. Meanwhile, long term
renewal agreements were signed with four existing
partners.
In Japan, a second partner relationship was signed
with Tohoku Electric, meaning HomeServe now has
access to around 7m households in that territory.
8 HVAC Integration O
The higher volume of HVAC acquisitions
requires disciplined and often standardised
processes to ensure successful integration
into HomeServe, creating strong links to the
Membership business and achieving synergies
with e.g. the engineer network.
Failure to integrate acquisitions quickly and
effectively could result in failure to deliver
synergies, and increase costs, resulting in
failure to achieve predicted revenues and
potentially lead to impairment.
9 Partner loss O
Underpinning HomeServe’s success in
its chosen markets are close commercial
relationships (affinity partner relationships)
principally with utility companies, and
municipal utility providers. The loss of multiple
relationships could impact HomeServe’s
future customer and policy growth plans and
retention rates. Growth plans, particularly in
North America, focus on signing new partners
to extend reach and provide new marketing
opportunities to grow the business.
HomeServe has benefitted from government
policy changes in certain regions to form
new partnerships e.g. liberalisation of
energy markets in Spain. Any reversal e.g. to
re-nationalise utilities could have an adverse
impact albeit HomeServe does have strong
experience working with public sector
municipals in North America.
With over 1,000 partners across the Group it
is inevitable that a few partners each year may
choose not to renew a contract as priorities or
commercial pressures change. In the UK and
North America where partner bases are more
diversified the impact is considered small. In
France the loss of e.g. Veolia would have a
bigger impact similar to that of Endesa in Spain
where the back book is now in run-off. Any
partner loss or failure to sign new partners
could impact households, customers and also
retention rates.
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HomeServe plc Annual Report & Accounts 2021
Strategic report
Principal risk and uncertainties
37
Overview
10 People O
Mitigations
FY21 update
Movement
HomeServe’s ability to meet growth expectations and
compete effectively is, in part, dependent on the skills,
experience and performance of its personnel.
Retention of people in established businesses is
key as is recruitment of talented people in growth
businesses e.g. Home Experts.
The inability to attract, motivate or retain key talent
could impact overall business performance.
HomeServe has a lot of growth opportunities and
ensuring appropriate bandwidth at the top of the
organisation is key to maintaining effective control
and oversight.
Gender Pay disclosures in the UK and reviews such
as Hampton Alexander also play an increasing role
in informing HomeServe’s People agenda and
ensuring we have the appropriate diversity of people,
experience and ideas to move the business forward.
Employment policies,
remuneration and benefits
packages and long-term
incentives are regularly
reviewed and designed to
be competitive with other
companies. Employee surveys,
performance reviews and
regular communication of
business activities are used to
understand and respond to
employee views and needs.
Processes exist to identify high
performing individuals and
ensure that they have fulfilling
careers, and HomeServe is
managing succession planning
effectively.
HomeServe employs c.7,400 people globally.
88% of those people completed our Global
People Survey, returning an engagement
score of 78%, up 7 percentage points on pre-
pandemic levels.
Furthermore, FY21 saw all the Group’s
businesses attain ‘Great Place to Work’
accreditation.
Tom Rusin, previously Global Membership
CEO, is now focussing full-time on realising the
substantial growth opportunities still ahead in
North American Membership & HVAC, whilst a
CEO EMEA, Ross Clemmow, has joined to lead
the Membership & HVAC businesses outside of
North America.
There has been an increased focus across the
Group to ensure the best people are in the right
roles to deliver current and future growth plans.
Annual and long-term performance plans
have been reviewed and changes are being
implemented to achieve clearer alignment
between our KPIs and our reward strategy.
11 International O
HomeServe has enjoyed success with its Membership
model in markets outside of the UK and intends to
expand to other regions, with a renewed focus on
those adjacent to our existing territories.
HomeServe has enjoyed success in France, Spain
and North America but has been unsuccessful in past
attempts to enter Australia, Belgium and Germany.
Failure to succeed could divert investment and
management time incurring not only losses in
the new country but also reduced performance
(including, for example, loss of customers, lower
profitability) in the core markets.
Strict criteria to identify attractive
markets.
Signed second utility partnership in Japan, with
products seeing a good reception.
Joint venture structure, such as
that employed to enter Japan,
diversifies risk and minimises
investment.
JV partner brings local market
knowledge and contacts.
HomeServe brings Membership
model systems and process
expertise.
During the year HomeServe narrowed focus for
international development to “near neighbours”.
A partnership was signed with Eneco in Belgium,
supported by the French business, and the
acquisition of a claims handling business with
operations in Portugal gives exposure to that
market.
Additionally, the Group decided not to proceed
with entering other markets further afield.
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12 Failure to deliver strategic growth O
HomeServe continues to have a number of
opportunities to develop its businesses. There is a risk
that it fails to determine where to focus energy, time
and resources and, as a result, misses opportunities or
does not deliver strategic growth targets or achieve
the expected or desired outcomes.
Potential strategic ventures are
all considered at a newly formed
cross-functional committee,
chaired by a senior executive
and with relevant subject matter
experts, to ensure they align with
the Group’s core competencies
and value drivers.
As a newly documented risk the individual
businesses have considered their own level of
risk.
New
this year
This is considered to be a greater risk in the
Home Experts businesses which are by nature
less mature in their role within the Group.
3
HomeServe seeks to drive the
sharing of best practice across
the Group and adopts a test and
learn approach to new initiatives.
13 Financial F
Key financial risks include the availability of short-term and long-term funding to meet
business needs and take advantage of strategic priorities such as M&A opportunities,
the risk of policyholders not paying monies owed, and fluctuations in interest rates and
exchange rates.
Interest rate risk
HomeServe’s policy is to manage interest cost using a mix of fixed and variable rate
borrowings. Where necessary, this is achieved by entering into interest rate swaps for
certain periods, in which HomeServe agrees to exchange, at specified intervals, the
difference between fixed and variable rate interest amounts calculated by reference to an
agreed notional principal amount. These swaps are designated to economically hedge
underlying debt obligations.
Credit risk
The risk associated with cash and cash equivalents is managed by only depositing funds
with reputable and creditworthy banking institutions. The risk of a policyholder defaulting
is mitigated as any policy cover will cease as and when any premium fails to be paid.
Liquidity risk
HomeServe manages liquidity risk by maintaining adequate reserves and banking facilities
and continuously monitoring forecast and actual cash flows.
Foreign exchange risk
Short-term foreign exchange risk is mitigated with the natural hedging provided by
the geographical spread of the businesses. While this will protect against some of the
transaction exposure, HomeServe’s reported results would still be impacted by the
translation of non-UK operations.
In July 2020, HomeServe successfully raised an
additional $250m and £54m via the US private
placement market. The proceeds were used
to clear headroom on the RCF. As at year end
HomeServe had gross debt of £634m against
its gross debt facilities of £1,036m, which
combined with a cash balance of £171m gives
a total headroom of £573m. Of the total debt
facilities of £1,036m, only £26m is due within
the next 12 months.
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STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021
38 Strategic report
Operating review
Operating review
Financial performance
£million
Membership & HVAC – North America
UK
France
Spain
New Markets
Membership & HVAC – EMEA
Home Experts
Inter-segment 1
Group
Revenue
Statutory operating
profit/(loss)
Adjusted operating
profit/(loss)
2021
506.4
338.9
132.6
195.7
—
667.2
139.8
(8.7)
2020
429.5
372.9
111.8
154.1
—
638.8
71.8
(7.8)
1,304.7
1,132.3
2021
82.2
(18.5)
28.4
14.7
(10.0)
14.6
(25.0)
—
71.8
2020
67.6
62.8
26.9
19.6
(0.9)
108.4
(17.4)
—
158.6
Key performance indicators
Membership
A resilient operational performance saw
the Membership retention rate increase
on the prior year
Income per customer
North America
UK
France
Spain
Group
Customer numbers (m)
North America
UK
France
Spain
Group
2021
4.7
1.6
1.2
0.9
8.4
2020
4.4
1.8
1.1
1.0
8.3
Policy retention rate
North America
UK
France
Spain
Group
Home Experts
Against a challenging backdrop, the Home
Experts businesses grew consumer demand,
with Checkatrade particularly notable.
Paying trades (tradespeople) (000)
Checkatrade
eLocal
Habitissimo
Group
2021
44
n/a
20
64
2020
39
n/a
24
63
Webs visits (m)
Checkatrade
eLocal
Habitissimo
Group
Contacts (m)
Checkatrade 2
eLocal 3
Habitissimo
Group
2021
105.0
72.5
35.6
17.7
(6.3)
119.5
(10.2)
—
214.3
2021
$108
£144
€109
€60
n/a
2021
85%
78%
88%
83%
83%
2021
29.0
n/a
89.0
118.0
2021
8.1
3.6
n/a
11.7
2020
85.4
81.0
33.8
20.1
(4.7)
130.2
(13.9)
—
201.7
2020
$102
£140
€108
€61
n/a
2020
83%
78%
89%
83%
82%
2020
23.6
n/a
87.3
110.9
2020
n/a
2.7
n/a
n/a
1 Inter-segment revenue includes transactions with other Group companies removed on consolidation and principally comprise royalty and other similar charges. 2 Checkatrade
commenced capturing contacts partway through FY20, hence a comparative for FY20 is not available. 3 For eLocal, contacts represents the total number of monetised calls.
The net impact of changes in the Euro and USD exchange rates between FY20 and FY2 resulted in a £12.4m decrease in the reported revenue and a £3.3m decrease in adjusted operating
profit.
HomeServe uses a number of alternative performance measures (APMs) to assess the performance of the Group and its individual segments. These are used in headline financial
results and throughout the Strategic report. APMs are non-GAAP measures which address profitability, leverage and liquidity and together with operational Key performance indicators
give an indication of the current health and future prospects of the Group. Definitions of APMs and the rationale for their usage are included in the Glossary at the end of this report with
reconciliations, where applicable, back to the equivalent statutory measure. The key APMs used in the strategic report are adjusted operating profit and adjusted profit before tax.
HomeServe plc Annual Report & Accounts 2021
MEMBERSHIP & HVAC – NORTH AMERICA
North American Membership
and HVAC had a great year,
despite much reduced
marketing volumes in the first
few months of the pandemic.
Strategic report
Operating review
39
1
Customers
4.7m
Income per customer
$108
7% from 4.4m
6% from $102
Policies
8.2m
Adjusted operating profit
$137.9m
10% from 7.5m
27% from $108.6m
Retention rate
Affinity partner households
85%
66m
2ppts from 83%
3% from 64m
Financial performance
FY21 saw North America take further strides towards all of
the medium term milestone targets set out at the June 2019
investor day, notably $230m of adjusted operating profit.
the directly employed engineers within North America’s
portfolio of HVAC businesses and, like HVAC installations
revenue, benefited from FY21 acquisitions as well as a full
year run rate from prior year acquisitions.
Total revenue growth of 22% was an extremely strong
performance in the pandemic environment, and was
underpinned by continued strong organic revenue growth
of 9%. Net policy income rose 13%, with 10% growth in the
number of policies seeing it break through the eight million
mark, whilst income per customer grew by 6%.
$million
Revenue
Net policy income
Repair network
Membership
HVAC installations
Other
Total revenue
Adjusted operating costs
Adjusted operating profit
Adjusted operating margin
£million
Revenue
2021
2020
Change
510.7
74.9
451.2
39.5
585.6
490.7
76.0
4.2
665.8
(527.9)
137.9
21%
53.3
2.1
546.1
(437.5)
108.6
20%
13%
90%
19%
43%
101%
22%
21%
27%
1ppt
2021
2020
Change
Net policy income
388.1
354.9
Repair network
Membership
HVAC installations
Other
Total revenue
57.1
30.6
445.2
385.5
57.9
3.3
42.4
1.6
506.4
429.5
Adjusted operating costs
(401.4)
(344.1)
Adjusted operating profit
Adjusted operating margin
105.0
21%
85.4
20%
9%
87%
16%
37%
101%
18%
17%
23%
1ppt
Revenue from the repair network and HVAC installations
both grew strongly. Repair network revenue largely derives
from jobs completed for Membership policyholders by
Adjusted operating margin rose by 1 percentage point,
as good progress on leveraging the fixed cost base in
Membership was partially offset by the dilutive impact of
continued growth in HVAC.
Operational performance
North America is the Group’s key driver of near term growth,
based on the substantial opportunity to further penetrate
a vast and early stage market, and the strong position
HomeServe has today as market leader. FY21 saw further
progress in capturing this growth opportunity.
Top line growth in North America continues to be driven
by partnerships with water and energy utilities, with the
development of existing partnerships just as material as the
signing of new ones. The pipeline for signing new utilities is
the strongest it has ever been, and the addition of 6m gross
new households was 58% ahead of FY20. The total number
of households to which the business has access rose to
66m. Net growth was 2m after three utilities, accounting
for 4m households, were removed from the base as the
partnerships were inactive.
In contrast to the tens of thousands of utilities and
municipal providers responsible for water, the structure of
the North American energy utility landscape is far more
concentrated, with the top 10% of energy utilities together
serving a combined 94m households. Energy efficiency
and decarbonisation is increasingly top of mind for these
utilities and their customers, and HomeServe recognises
the potential to partner with utilities to add value for their
customers in this area. The business saw good early traction
during the second half as it launched an electric vehicle
charging maintenance product with one of its largest energy
partners. This product is already proving to be a differentiator
in opening up utility conversations more quickly.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 40 Strategic report
Operating review
MEMBERSHIP & HVAC – NORTH AMERICA CONTINUED
Whilst adding new utility partnerships and new households
drives the long-term potential size of the North American
business, near term growth in customers, revenue and profit
continues to be largely driven by existing partnerships. Some
of North America’s longest-standing partners continue to be
a source of the best customer growth. This gives excellent
opportunities to invest marketing dollars both with existing
partners, and also in fresh new territories which have never
previously seen a HomeServe type offer.
FY21 saw further good growth in customers, up 7%, with
more than 6 percentage points of this driven organically. The
slight slow down from the prior year (FY20: 9% customer
growth) reflects the decision to reduce marketing spend
during the first half given the onset of the COVID pandemic.
This marketing spend was subsequently deployed in the
second half, during which the sequential customer growth
accelerated to 5% (first half of FY21: 2% customer growth)
- the fastest since the second half of FY19 – as campaigns
continued to see good take-up rates.
The Group’s HVAC buy-and-build strategy is most advanced
in North America, and here too FY21 saw further progress
towards the Milestone 2 target of HVAC contributing $30-
45m of adjusted operating profit to the overall $230m target.
There was a profitable in-year contribution from a further
seven acquisitions, with North American HVAC operating
profit now around $10m, and margins approaching the 10-
15% range being targeted globally.
A significant element of recent historical capital expenditure
has been to embed further automation and digitisation
in Membership. This is now reducing and in some cases
largely eliminating the need for human intervention in the
claims process – bringing cost benefits whilst also driving a
superior customer experience. Progress during the second
half has given confidence on the role this programme
will play as a component of the remaining bridge to the
milestone targets for adjusted operating margin of 24-26%.
A base of highly satisfied customers who derive value from
their membership and renew their policies continues to
provide a solid foundation towards the Milestone 2 target of
between 6-7m customers. Customer satisfaction improved
on the prior year. Against a backdrop where pandemic
restrictions have prompted renewed focus on homes,
thereby highlighting the value of HomeServe’s proposition,
the importance of great customer service to HomeServe’s
model was seen in the materially higher retention rate,
which rose by 2ppts to 85%.
HomeServe plc Annual Report & Accounts 2021 MEMBERSHIP & HVAC – EMEA
All of our European
businesses display attractive
characteristics: loyal,
recurring customers with
high retention rates.
UK
Customers
1.6m
10% from 1.8m
Financial performance
Net policy income declined by 6% as the UK business
continued to focus on fair pricing outcomes for customers
and marketed at lower levels than it has historically. The shift
away from renewal discounts for early vintage customers
is well established and drove a further reduction in the
number of customers (down 10%), which was only partially
offset by a 3% rise in income per customer.
£million
Revenue
2021
2020
Change
Net policy income
233.2
249.4
(6%)
Repair network
80.3
89.5
(10%)
Membership
313.5
338.9
(7%)
HVAC installations
Other
12.1
13.3
21.2
(43%)
12.8
Total revenue
338.9
372.9
Adjusted operating costs
(266.4)
(291.9)
Adjusted operating profit
Adjusted operating margin
72.5
21%
81.0
(10%)
22%
(1ppt)
4%
(9%)
(9%)
Strategic report
Operating review
41
2
The EMEA business division encompasses the established
Membership & HVAC businesses in the UK, France and
Spain, HomeServe’s share of the joint venture operation with
Mitsubishi Corporation in Japan and expansion initiatives
into adjacent territories in Europe.
£million
Total revenue
2021
2020
Change
667.2
638.8
4%
8%
Adjusted operating costs
(547.7)
(508.6)
Adjusted operating profit
119.5
130.2
(8%)
Policies
4.4m
Income per customer
£144
11% from 4.9m
3% from £140
Retention rate
Affinity partner households
78%
unchanged from
prior year
26m
unchanged from
prior year
The lower customer base also impacted repair revenue,
as the UK directly employed engineer network completed
a lower number of jobs (FY21: 0.8m, FY20: 0.9m) than the
prior year. This was intensified in the first half as pandemic
restrictions limited the range of jobs that the directly
employed network was permitted to complete.
HVAC installations was the area most impacted by the
pandemic in the UK. Revenue declined sharply year-
on-year; installations are largely discretionary and non-
emergency in nature meaning demand was heavily
dampened by stay-at-home restrictions in the first half, and
particularly the first quarter. Whilst installation volumes were
down around 60% on the prior year in the first half, greater
access to homes and a pivot to video survey technology in
the second half resulted in a rebound such that installation
volume during Q4 was higher year-on-year.
Adjusted operating costs fell in line with revenues, reflecting
the elements of the cost base (partner commissions and
marketing) that flex with customer acquisition and retention,
leaving the adjusted operating margin broadly unchanged
from the prior year.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 42 Strategic report
Operating review
MEMBERSHIP & HVAC – EMEA CONTINUED
UK continued
Operational performance
On a statutory basis the UK business recorded an
exceptional charge of £87.8m, principally in relation to
the full impairment of its eServe CRM system. eServe was
highly configured and became costly and inflexible to
implement, with further configuration issues emerging as
implementation progressed. As a result of this customisation,
the system exhibited high operating costs and a high cost of
change. During the second half of FY21 additional capability
issues came to light as more policies were introduced
onto the system, meaning that the duration of the parallel
run period alongside the legacy system would need to
be extended. Following an extensive review of system
capability and robustness and the ongoing operational
needs of the business, the difficult decision was taken to
revert the minority of customers on this platform back
to the existing Ensura CRM system, which is the proven
system of record in North America. Following a period of
decommissioning, eServe will be replaced by a flexible,
cloud-based solution. Current planning suggests this will
be a Salesforce solution, similar to those implemented
successfully in France and which is planned for
implementation in North America.
The transformation of the UK business accelerated in the
second half, with new management focused on embedding
the operational processes and technology that have
supported growth in North America. Key initiatives include
implementation of a cloud-based integrated claims and
field management application which enables real-time
status updates and best-in-class route optimisation. Nearly
all directly employed engineers were migrated onto this
platform in the second half and migration of the contractor
network is underway. Looking forward, a natural language
call automation platform, which enables customers to claim
and book an appointment all within the application, will be
rolled out in FY22.
These transformational technologies significantly enhance
customers’ experience and will drive efficiency gains in the
coming year.
Alongside the transformation of operational processes and
technology, the UK team are developing several routes to
growth including significant new energy partnerships and
acquiring more customers through digital channels. The UK
team has also started to execute the HVAC buy-and-build
strategy successfully deployed in the US, France and Spain.
In energy, the UK business strengthened its relationship
with E.On, a ‘Big 6’ energy player. E.On will commence a
call transfer program with HomeServe in the first half of
FY22, in addition to the digital program already in place.
Last week, a partnership was signed with Shell Energy to
offer HomeServe’s home assistance products to their 1m
customers. The UK business has been encouraged by
early engagement and collaboration with other energy
players in the UK market who seek to offer consumers a
seamless, digitally-led way to manage their home assistance
needs.
Water partnerships remain the largest customer acquisition
channel and the UK business remains focused on
maximising these relationships. In the second half, long-
term renewal agreements were secured with five water utility
partners. Periodically, management focus and marketing
spend is reviewed and re-deployed into more attractive
acquisition opportunities, as was the case with Thames
Water, where the partnership expired on 31 March 2021.
HomeServe retains exclusive renewal rights on the 0.1m
customer book built through the Thames partnership.
Digital customer acquisition accelerated in FY21 in all
branded channels – water, energy and HomeServe directly
owned digital channels – helped by a redesigned, simplified
website with improved conversion. Web traffic significantly
increased as the improved conversion resulted in more
effective paid marketing. High quality optimised content
also helped to drive growth in organic search traffic. In total,
acquisition through digital channels increased by 33% year-
on-year, with digital accounting for a quarter of gross new
customer additions. The digital channel remains a key focus
area for further improvements in FY22 and beyond.
Within HVAC, the legacy installation business has been
re-structured and improved. Alongside this, the UK joined
the other HomeServe territories in deploying an HVAC
buy-and-build strategy. North America, France and Spain
developed a successful model focussed on acquiring
smaller HVAC businesses founded on strong local
reputations. The first UK acquisition as part of this strategy
completed partway through the second half and made a
profitable in-year contribution. Looking ahead, an attractive
pipeline of other opportunities is now in place.
HomeServe plc Annual Report & Accounts 2021 France
Customers
1.2m
5% from 1.1m
Financial performance
France saw continued growth in FY21, surpassing the
previous records attained in FY20 for the highest ever
revenue and operating profit.
Net policy income increased by 5% to €126.6m, driven by
further strong growth in customer numbers which rose
5% on the prior year. HVAC intsallations revenue increased
129% to €17.9m, with contribution from a further ten FY21
acquisitions and the annualisation of prior year acquisitions.
€million
Revenue
Net policy income
Repair network
Membership
HVAC installations
Other
Total revenue
Adjusted operating costs
Adjusted operating profit
Adjusted operating margin
£million
Revenue
Net policy income
Repair network
Membership
HVAC installations
Other
Total revenue
Adjusted operating costs
Adjusted operating profit
Adjusted operating margin
2021
2020
Change
126.6
0.3
126.9
17.9
3.7
148.5
(108.7)
39.8
27%
120.1
0.4
120.5
7.8
0.1
128.4
(89.4)
39.0
30%
5%
(14%)
5%
129%
n/a
16%
22%
2%
(3ppts)
2021
2020
Change
113.0
0.3
113.3
16.0
3.3
132.6
(97.0)
35.6
27%
104.5
0.4
104.9
6.8
0.1
111.8
(78.0)
33.8
30%
8%
(23%)
8%
135%
n/a
19%
24%
5%
(3ppts)
The adjusted operating margin of 27% (FY20: 30%) is
indicative of the targeted level over the medium term and
reflects the investment in the growth opportunities open
to the French business including a renewed partnership
with Veolia and accelerated customer acquisition via digital
channels.
Operational performance
Gross customer additions of 0.2m were the best ever in the
20 year history of the French business, up by 10% on the
prior year and helping drive the period end total customer
number to 1.2m. This was underpinned by continued
Strategic report
Operating review
43
Policies
2.4m
Affinity partner households
19m
3% from 2.4m
4% from 18m
Retention rate
88%
Income per customer
€109
1ppt from 89%
1% from €108
acquisition through the long-standing relationship with
Veolia (where customer additions grew 13% on the prior
year) and also developing activity in newer channels such
as through online aggregators in the home moving process
like Papernest (where customer acquisition almost trebled
compared to the prior year). The French business recognises
the opportunity to drive further customer growth through
non-utility channels, and was pleased to extend the
partnership with Papernest by a further two years during the
year, as well as launch partnerships with three new energy
retailers.
During the year the French business invested in its IT
capabilities in order to provide a robust platform for further
profitable growth. The legacy policy management and
customer service systems used in Membership were
replaced by a cloud-based Salesforce CRM system, and in
the second half the first HVAC business was successfully
migrated to a Salesforce system which will, amongst other
benefits, aid policy upsell initiatives. More businesses in
the HVAC portfolio will migrate to this operating platform
through FY22.
The buy-and-build strategy continued in HVAC with ten
acquisitions completed during the year. The migration of
these HVAC businesses to a common operating system will,
over time, maximise the cross-selling opportunity between
installations and Membership cover, and the additional
policies from the ten in-year acquisitions now means the
French HVAC portfolio has in excess of 50,000 policies.
Reflecting the Group’s decision to focus its international
expansion efforts in Membership on adjacent territories, the
French business signed a new five year affinity partnership
with Eneco Belgium N.V., the third largest energy provider
in Belgium, at the beginning of the second half. A Belgium-
based managing director is now in role and has joined
the management team of the wider French business, as
marketing activity begins to scale up in step with the easing
of pandemic restrictions.
Customer satisfaction drives the recurring revenue model
in Membership and the French business was delighted to
receive high profile awards in recognition of the customer-
centric culture. The French team were awarded Élu Service
Client de l’année for the fifth consecutive year, and also won
the Gold Trophy at the CX Awards.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 44 Strategic report
Operating review
MEMBERSHIP & HVAC – EMEA CONTINUED
Spain
Policies
1.1m
Income per customer
€60
4% from 1.1m
2% from €61
Customers
0.9m
9% from 1.0m
Retention rate
83%
unchanged from prior year
Operational performance
The Claims business saw a noticeable impact from the
pandemic but responded robustly to close out the year well.
Strict stay-at-home measures in the April-June quarter of
calendar year 2020 meant a significant volume of jobs could
not be completed, with completed job volumes running at
less than 50% of expected levels. The business supported
its people through this period and retained headcount
levels and activity returned to more normal levels during
subsequent lockdowns. Mesos, the claims handling
business acquired during the first half, continues to be
integrated and made a good profitable in-year contribution
of €2.2m. Mesos expands the service capabilities of the
Claims business, diversifies the customer base and also
provides entry into the adjacent territory of Portugal.
In Membership, gross customer wins of 65k rose by 84% on
the prior year, with particularly good growth in acquisition
through the retail energy channel. Though this was more
than offset by churn in the customer base, good progress
was made during the second half in advancing engagement
with potential future partners, particularly in the retail energy
space, giving a firm base for continued growth in customer
acquisition in FY22.
In HVAC, Spain made a further four acquisitions during the
second half, bringing the total to six for the full year. The
HVAC buy-and-build strategy prioritises well-run businesses
with strong local reputations, and the six acquisitions
enabled entry into new territories of strategic importance,
including the Madrid urban area. An exciting pipeline of
opportunities remain of both new “hub” acquisitions, as well
as smaller bolt-ons.
Financial performance
Total revenue in Spain grew by 24% to €219.0m, as
expansion in Claims and HVAC operations continued.
Revenue growth in the Claims business (captured in the
Repair network line) was driven by the contribution of
a first half acquisition (Mesos) and continued growth in
job volumes in the existing business. Meanwhile HVAC
installations revenue grew strongly driven by contribution
from FY21 acquisitions as well as a full year’s benefit from
prior year M&A. As expected, net policy income declined by
3% as the Endesa back book continues to run off.
€million
Revenue
Net policy income
Repair network
Membership
HVAC installations
Total revenue
Adjusted operating costs
Adjusted operating profit
Adjusted operating margin
£million
Revenue
Net policy income
Repair network
Membership
HVAC installations
Total revenue
Adjusted operating costs
Adjusted operating profit
Adjusted operating margin
2021
2020
Change
54.8
146.8
201.6
17.4
219.0
(199.2)
19.8
9%
56.3
108.2
164.5
12.1
176.6
(153.5)
23.1
13%
(3%)
36%
23%
44%
24%
30%
(14%)
(4ppts)
2021
2020
Change
48.9
131.2
180.1
15.6
195.7
(178.0)
17.7
9%
49.2
94.4
143.6
10.5
154.1
(134.0)
20.1
13%
(1%)
39%
25%
49%
27%
33%
(12%)
(4ppts)
Adjusted operating costs rose by 30% as direct costs in both
the Claims and HVAC businesses grew in line with revenue.
Operating margins in the second half were broadly in line
with the prior year, though this was offset by the first half
impact of largely fixed employment costs in the Claims
business being covered by lower than expected job volumes
in the initial stages of the pandemic.
HomeServe plc Annual Report & Accounts 2021 Strategic report
Operating review
45
HOME EXPERTS
3
New Markets
We continued to develop
our Home Experts platforms
at pace to match more
homeowners with trades
(tradespeople) online.
Of the £6.3m operating loss in New Markets in FY21, two
thirds was driven by continuing investment in the joint
venture with Mitsubishi Corporation in Japan, and one
third by costs associated with prospecting activity for new
Membership territories, which has now concluded.
Home Experts comprises the group’s online platform
businesses, being Checkatrade in the UK, eLocal in North
America and the group’s interests in other geographies. This
division is expected to achieve profitability in FY22.
£million
Adjusted operating loss
2021
(6.3)
2020
Change
£million
(4.7)
34%
Revenue
2021
2020
Change
Checkatrade
eLocal
Habitissimo
France
Total revenue
38.9
91.3
9.6
—
139.8
38.5
22.1
11.1
0.1
71.8
Adjusted operating costs
(150.0)
(85.7)
1%
313%
(14%)
(93%)
95%
75%
Adjusted operating loss
(10.2)
(13.9)
(28%)
After two years of the Japanese joint venture with Mitsubishi
Corporation, there has been good progress. A number
of marketing campaigns have been executed with the
customer base of the first utility partner, Chugoku Electric.
Take-up rates on these campaigns have performed well,
with payback on the marketing spend towards the shorter
end of the 18-36 month range observed across the
established Membership territories.
HomeServe Japan now has over 17,000 customers, and
is focused on increasing marketing activity to accelerate
customer growth. Early data on retention rates of the first
policies coming up for renewal are very promising.
Towards the end of the year Tohoku Electric Power became
the second utility partner signing for HomeServe Japan,
adding a further 3.9m households to the 2.9m covered
by Chugoku, and the pipeline of further opportunities is
attractive.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 46 Strategic report
Operating review
HOME EXPERTS CONTINUED
Financial performance
At Checkatrade, the key dynamic impacting the top line was
the support given to the trades base at the onset of the first
UK national lockdown. Trades had the option of either a
50% discount or zero-cost “affiliate” membership for the first
three months of the financial year. 80% of the trades base
opted for the half-price discount, with 20% taking the affiliate
membership option, measures costing around £5m of
revenue. This saw average revenue per trade decline 8% on
the prior year. However the higher number of trades offset
this to leave total revenue broadly flat.
£million
Total revenue
Adjusted operating costs
Adjusted operating loss
2021
38.9
(54.9)
(16.0)
2020
38.5
(48.9)
(10.4)
Change
1%
12%
54%
Alongside a slightly higher depreciation charge as new
technology systems went live, the revenue impact of the
pandemic subscription relief was the big driver of the higher
adjusted operating loss for Checkatrade.
Operational performance
Despite the challenging backdrop caused by the pandemic,
FY21 saw Checkatrade make substantive progress in
readiness to achieve the scale set out in its milestone targets.
In a year which saw significantly reduced access to
consumers’ homes due to lockdown restrictions,
Checkatrade grew the base of paying trades by 11% - a very
pleasing result. Furthermore, the second half saw a pick-up
in the sequential half-on-half growth rate in trades, setting
the business up strongly as it entered FY22.
The key headwind to faster growth in the trades base
over the last couple of years has been member churn,
particularly among newer members. FY21 saw continued
efforts to tackle this. The introduction of ‘request a quote’
and additional search functionality has delivered a more
even distribution of consumer contacts amongst trades.
The ’request a quote’ function, where the consumer wishes
Checkatrade to find them a trade, was introduced at the end
of the first half and now accounts for a significant proportion
of total contacts on the platform. The business is focussed
on moving trades growth materially above the 11% delivered
in FY21 through strong acquisition and improvements in
early life retention.
Paying trades
44k
Average revenue per trade
£939
11% from 39k
8% from £1,023
Contacts
8.1m
from n/a
Web visits
29.0m
23% from 23.6m
On the consumer side, FY21 saw Checkatrade strengthen
its position as the clear market leader among UK consumers
searching for a trade online. Of those consumers searching
for a trade through both online and offline channels in
the 12 months ending February 2021, 16% did so with
Checkatrade – significantly ahead of the second online
player in the market at 6% and meaning Checkatrade
gained share over that time period (+4ppts v. February
2020). This provided an optimal platform for Checkatrade
to further assert its brand leadership during the second
half as it executed its ”Julius Caesar” themed advertising
campaign across TV, radio and social media. Results from
the first leg of the campaign were very strong, driving an
increase of 6ppts in spontaneous brand awareness to 57%
of consumers – again significantly ahead of the nearest
competitor.
Checkatrade is clear on its roadmap to drive top line growth
and, as the FY23 profitability target comes further into view,
it is also focussed on driving this growth profitably. The June
2019 investor day set out how technology investment would
be key to this, and FY21 saw the successful execution of two
major technology programmes. Firstly, vetting automation
has markedly reduced the levels of human intervention
and time needed for a trade to proceed through the 12
different checks required to gain ’recommended, vetted
and monitored’ (RVM) status on the platform down to just
three days as at March 2021 (March 2019: 14 days). Secondly,
a new billing engine went live at Checkatrade in March. All
new trades joining the platform now do so onto this billing
engine, whilst existing members will be migrated during
FY22. The billing engine will ensure the business scales in an
efficient manner, delivering cost savings as well as revenue
optimisation by providing a platform for automating new
product initiatives.
In summary, FY21 saw further real progress by Checkatrade
as it seeks to become the reference point in the UK for
sourcing qualified and vetted tradespeople online, and the
model for the Group’s Home Experts’ marketplaces.
HomeServe plc Annual Report & Accounts 2021 Strategic report
Operating review
47
Other - Habitissimo and France
£million
Total revenue
2021
9.6
2020
11.2
Adjusted operating costs
(17.0)
(16.5)
Adjusted operating loss
(7.4)
(5.3)
Change
(15%)
3%
41%
Monetised calls 1
3.6m
32% from 2.7m
Trades
20k
Web visits
89.0m
18% from 24k
2% from 87.3m
Financial performance
At eLocal, where the different model means calls rather than
subscriptions are the key monetisable unit, a 32% increase
in leads drove a similar level of revenue growth compared
to the prior 12 months of FY20. HomeServe acquired its
79% stake in eLocal in November 2019, meaning only four
months’ contribution to the FY20 comparative number.
Financial performance
Habitissimo saw a larger and more sustained impact from
the pandemic, particularly in its Latin American markets of
Brazil, Mexico and Chile, resulting in a 15% decline in revenue
on the prior year. Adjusted operating costs flexed down
slightly, however the top line impact still drove a higher
adjusted operating loss than the prior year.
£million
Total revenue
Adjusted operating costs
Adjusted operating profit
2021
91.3
(78.1)
13.2
2020
22.1
(20.3)
1.8
Change
313%
284%
634%
eLocal saw a strong adjusted operating profit performance
for the year of c.$18m equivalent.
Operational performance
Despite the impact of the pandemic, eLocal maintained its
impressive growth momentum in its first full 12 months of
HomeServe majority ownership. Stay-at-home restrictions
across the US during the April-June 2020 calendar year
quarter impacted consumer demand, particularly in
categories such as locksmiths, however the easing of
restrictions during Q2 saw consumer demand recover
quickly, indeed to record levels, during the summer months.
Monetised calls, the number of consumer telephone calls
which eLocal can sell to trades, grew by 32% across the
year, broadly in line with revenue growth had eLocal been
majority owned by HomeServe throughout FY20.
eLocal continues to see strong growth prospects ahead
based on driving penetration in its existing categories, as well
as entering new ones.
Operational performance
FY21 saw Habitissimo further sharpen its focus on its key
markets, whilst launching the Directory Extra model.
The second half launch of the Directory Extra model, meant
a pause in new trades joining the platform and a conversion
of existing trades to an automatic model of purchasing
contacts (calls and quote requests).
Habitissimo’s exposure to the Latin American markets of
Brazil, Mexico and Chile meant it saw the most pronounced
impact from the COVID pandemic of the Home Experts
businesses. The greater focus on its European markets
saw Habitissimo purchase an online platform player in Italy
during the second half, and Habitissimo will now be the
market leader in Italy on a combined basis.
France
Home Experts activities in France relate to Maison.fr,
in which HomeServe retains a 20% stake following the
sale of 80% of the test operation in Lyon to the Maison.fr
management team during the first half.
1 FY20 comparative for monetised calls represents full 12 months.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 48 Strategic report
Financial review
Financial review
“Adjusted profit before tax rose by 6% to
£191.3m, with continued strong growth
in North America, good profit growth in
France and the narrowing of losses in
Home Experts more than offsetting lower
profits in the UK and Spain.”
Statutory profit before tax is reported after the amortisation of
acquisition intangibles, exceptional items and certain transaction
related costs. On this basis profit before tax was £47.2m, as
underlying profit growth was significantly offset by exceptional
charges of £92.4m, mainly in relation to the full impairment of
the eServe CRM system in the UK (see below).
Net finance costs
Net finance costs rose to £24.6m (FY20: £20.7m) due to the
higher average net debt balance year-on-year combined
with the unwinding of interest on contingent consideration in
relation to previous M&A activity.
Amortisation of acquisition intangibles
Acquisition amortisation relates to customer and other contracts
held by businesses, which were acquired by HomeServe as part
of business combinations and asset purchases.
The amortisation of acquisition intangibles of £45.0m (FY20:
£35.5m) increased principally due to charges relating to prior
year M&A activity.
Amortisation of acquisition intangibles is excluded from the
adjusted performance measures reported by the Group in each
specific reporting period, ensuring that these measures only
reflect the revenue attributable to, and costs incurred by, the
Group in managing and operating its businesses and assets at
that time in each reporting period.
Certain transaction related costs
Certain transaction related costs of £6.7m (FY20: nil) were
incurred mainly in respect of put options associated with
the remaining c.21% of eLocal which the Group does not
currently own.
DAVID BOWER
The financial statements have been prepared in accordance
with international accounting standards in conformity
with the requirements of the Companies Act 2006 and
international Financial Reporting Standards (EC) No
1606/2002 as it applies in the European Union.
Group statutory results
The headline statutory financial results for the Group are
presented below.
£million
Total revenue
Operating profit
Net finance costs
Adjusted profit before tax
Amortisation of acquisition
intangibles
Certain transaction related costs
Exceptional items
Statutory profit before tax
Tax
Profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
2021
1,304.7
2020
1,132.3
71.8
(24.6)
191.3
(45.0)
(6.7)
(92.4)
47.2
(15.4)
31.8
31.1
0.7
31.8
158.6
(20.7)
181.0
(35.5)
—
(7.6)
137.9
(32.1)
105.8
106.0
(0.2)
105.8
Profit before tax
Adjusted profit before tax rose by 6% to £191.3m, with
continued strong growth in North America, good profit
growth in France and the narrowing of losses in Home Experts
more than offsetting lower profits in the UK and Spain.
HomeServe plc Annual Report & Accounts 2021
Strategic report
Financial review
49
Exceptional items
The Group incurred net exceptional charges of £92.4m
during the year (FY20: net charge of £7.6m), of which
£84.8m was due to the full impairment of the UK’s ‘eServe’
CRM system and related exceptional provisions on onerous
contracts. eServe was highly configured and became costly
and inflexible to implement, with further configuration
issues emerging as implementation progressed. As a result
of this customisation, the system exhibited high operating
costs and a high cost of change. During the second half
of FY21 additional capability issues came to light as more
policies were introduced onto the system, meaning
that the duration of the parallel run period alongside the
legacy system would need to be extended. Following an
extensive review of system capability and robustness and
the ongoing operational needs of the business, the difficult
decision was taken to revert the minority of customers
on this platform back to the existing Ensura CRM system,
which is the proven system of record in North America.
Following a period of decommissioning, eServe will
be replaced by a flexible, cloud-based solution. Current
planning suggests this will be a Salesforce solution, similar
to those implemented successfully in France and which is
planned for implementation in North America. An additional
impairment charge of £2.1m was also recorded in relation
to other intangible software assets in the UK, bringing their
carrying values to nil.
During the year the Group reviewed international
development opportunities in Membership & HVAC and
considered where capital allocated to this activity would
create the most value for shareholders. This saw the Group
adopt a ‘near neighbour’ strategy, focussing on territories
adjacent to the existing businesses. As a result, the central
International Business Development team was streamlined,
resulting in an exceptional charge of £3.7m. This refocusing
exercise also saw additional redundancy charges of £1.8m,
as the Group sought to align some corporate functions
more closely with the federated businesses.
A reconciliation between adjusted and statutory amounts is
included with the Glossary at the end of this announcement
along with further commentary on HomeServe’s use of
adjusted items as an Alternative Performance Measure.
Tax strategy
The Group has continued to operate within the tax strategy
approved by the Board in May 2020. The tax strategy is
subject to annual review and reflects HomeServe’s status as
a plc, and the regulated nature of its business which requires
strong governance and consideration of reputation as well
as compliance with local laws, regulations and guidance.
The UK elements of the tax strategy document are publicly
available on the HomeServe plc website as required by UK
legislation.
The Group tax strategy covers how HomeServe:
i.
applies tax governance on an ongoing basis and
maintains strong internal controls in order to
substantially reduce tax risk;
ii. will not engage in artificial transactions the sole purpose
of which is to reduce tax;
iii. holds a strategic aim to retain its low tax risk rating as
determined by the UK Tax Authority’s Business Risk
Review process; and
iv. works with all tax authorities in an open, honest and
transparent manner.
Tax charge and effective tax rate
The Group’s tax charge in the financial year was £15.4m
(FY20: £32.1m). The pre-exceptional effective tax rate for the
year ended 31 March 2021 was 24% (FY20: 23%). The post-
exceptional effective tax rate for the same period was 33%
(FY20: 24%).
UK corporation tax is calculated at 19% (FY20: 19%) of the
estimated assessable profit for the year. In its 2021 Budget,
the UK Government announced that the main UK corporate
rate would be maintained at 19% until 31 March 2023, before
being increased to 25% from 1 April 2023. This proposal
is expected to be substantively enacted over the coming
months whereby our UK deferred taxes will be re-measured
accordingly. However, based on our current UK deferred tax
position we have estimated that this UK tax rate increase will
not give rise to a material effect.
The corporate income tax rates in the overseas countries in
which the Group operates continue to be higher than the
UK rate, which results in a Group effective rate higher than
the headline UK rate. As the proportion of the Group’s profits
earned overseas continues to grow, the effective tax rate is
expected to increase slightly.
Other comprehensive income
Included within other comprehensive income is £4.5m of
remeasurements on defined benefit pension schemes and a
£27.5m foreign exchange loss on translation.
At 31 March 2021 the fair value of the Group’s investment
held in a manufacturer of smart thermostat connected
home technology was reassessed in light of the valuation
indicated by the investee’s latest equity funding round. The
result of this reassessment increased the fair value of the
Group’s investment by £4.4m. This movement, net of the
recognition of a £1.3m associated deferred tax liability, was
recorded in the investment revaluation reserve.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021 50 Strategic report
Financial review
Cash flow and financing
HomeServe’s business model continues to be highly cash
generative with free cash flow in FY21 of £135.0m (FY20:
£93.4m).
£million
Adjusted operating profit
Exceptional items
Certain transaction related costs
Amortisation of acquisition
intangibles
Operating profit
Impact of exceptional items
Impact of certain transaction
related costs
Depreciation and amortisation
Non-cash items
Increase in working capital
Cash generated by operations
Net interest and associated
borrowing costs
Repayment of lease principal
Taxation
Capital expenditure - ordinary
Capital expenditure - acquisitions
of policy books
Free cash flow
Acquisition of subsidiaries
Disposal of subsidiary
Acquisition of non-controlling
interest
Contribution to equity accounted
investee
Proceeds on disposal of equity
accounted investment
Equity dividends paid
Purchase of own shares
Proceeds on issue of share capital
Net movement in cash and bank
borrowings
Impact of foreign exchange and
other non-cash items
Net debt acquired
IFRS 16 lease liabilities acquired
2021
214.3
(92.4)
(5.1)
(45.0)
71.8
92.2
5.1
123.5
10.2
(25.1)
277.7
(21.7)
(14.8)
(35.1)
(71.1 )
—
135.0
(77.3)
(3.9)
2020
201.7
(7.6)
—
(35.5)
158.6
7.6
—
109.1
9.2
(44.1)
240.4
(18.5)
(12.4)
(30.2)
(79.0)
(6.9)
93.4
(140.6)
—
—
(7.7)
(2.2)
—
—
(80.5)
—
—
8.4
(73.5)
(3.0)
0.1
(28.9)
(122.9)
23.1
(4.3)
(4.0)
(11.5)
(11.8)
(3.4)
Lease liabilities – adoption of IFRS 16
—
(52.6)
Working capital
Working capital absorption was £25.1m in FY21 (FY20:
£44.1m) slightly lower than guided, reflecting the
strengthening of sterling, with its impact on closing
receivables in North America, as well as the timing benefit of
partner payments around the year end.
Capital expenditure
Total capital expenditure of £71.1m (FY20: £85.9m) included
£12.8m (FY20: £21.0m) of payments made to partners
who undertake marketing activity to acquire customers
on HomeServe’s behalf. This activity continued to grow
in France, but was more than offset by declines in North
America and Spain.
The balance of £58.3m (FY20: £64.9m) principally
comprised technology investments in customer and
network management systems in Membership, and
investments to underpin efficient trades growth at
Checkatrade.
Acquisitions
M&A activity continued to support HomeServe’s growth
ambitions, incurring a cash outflow in the year of £77.3m
(FY20: £140.6m). There were two material acquisitions in the
year;
• Solusat Asistencia Técnica S.L., (“Solusat”), enhancing the
scale and scope of HomeServe’s HVAC capabilities in
Spain
• Mesos Gestión y Servicios S.L., (“Mesos”), expanding
the product range and customer base of the Spanish
claims handling business, as well as bringing an entry into
Portugal.
An additional 25 businesses were acquired for a net cash
outflow of £41.0m as the Group continued the pursuit
of its HVAC buy-and-build strategy in North America,
France, Spain and the UK, and Home Experts completed
an acquisition in North America to bring further technical
capability and in Italy, to bring further scale in that market.
The total cash outflow on acquisitions of £77.3m consisted
of £73.7m net cash outflow in the year, as well as £3.6m
paid ondeferred and contingent consideration relating to
previous business combinations (FY20: £6.4m).
HomeServe continues to identify and assess M&A
opportunities in all of its businesses, including further HVAC
investment as it expands its buy–and-build initiative. Policy
book M&A remains a low risk approach to accelerating
growth and HomeServe continues to attempt to unlock
opportunities in all countries, particularly North America.
Movement in IFRS 16 lease liabilities
9.4
Opening net debt
Closing net debt
(509.0)
(513.7)
(2.1)
(304.7)
(509.0)
Purchase of own shares
During the year no shares were repurchased (FY20: 249,975
shares repurchased at a cost of £3.0m). No shares were
transferred to individuals to satisfy awards (FY20: nil).
HomeServe plc Annual Report & Accounts 2021
Strategic report
Financial review
51
Earnings per share
Basic earnings per share for the year decreased by 71%
to 9.3p from 31.7p due principally to the impact of the
exceptional items discussed above. On an adjusted basis,
earnings per share increased 3% from 41.3p to 42.7p. The
weighted average number of shares increased from 334.2m
to 335.8m principally due to new shares issued in fulfilment
of share schemes that vested in the year.
Dividends
Given the Group’s resilient performance, and the Board’s
confidence in HomeServe’s future growth prospects, the
Board is proposing to increase the final dividend to 19.8p
per share (FY20: 17.8p) to be paid on 2 August 2021 to
shareholders on the register on 2 July 2021.
Together with the interim dividend declared in November
2020 of 6.2p (November 2019: 5.8p), this represents a 10%
increase in the total ordinary dividend payment for the year
of 26.0p (FY20: 23.6p), which is 1.64x covered by the FY21
adjusted earnings per share (FY20: 1.75x).
Financing
In FY21 the Group continued to target net debt in the range
of 1.0-2.0x adjusted EBITDA, measured at 31 March each
year. With adjusted EBITDA of £292.8m and net debt of
£513.7m, including c.£51m of lease liabilities at 31 March
2021, the Group was inside its target range at 1.8x. Due to
the ordinary seasonality of the business, net debt is expected
to increase at the next half year before declining, absent any
future M&A.
During the year the Group raised an additional $250m and
£54m via the US private placement market. The proceeds
were used to clear headroom on the revolving credit facility
(RCF).
As at year end, HomeServe had gross debt of £634m against
its gross debt facilities of £1,036m, which combined with a
cash balance of £171m gives a total headroom of £573m.
With this headroom, and with only £26m of the facilities due
within the next 12 months, the Group is well positioned to
take advantage of compelling growth opportunities.
Net interest and borrowing costs paid increased to £21.7m
(FY20: £18.5m) principally due to the higher average net debt
figure year-on-year.
Foreign exchange impact
The impact of changes in the Euro and USD exchange rates
between FY20 and FY21 resulted in a £12.4m decrease in the
reported revenue and a £3.3m decrease in adjusted operating
profit of the international businesses as summarised in the
table below, largely as a result of an adverse movement in the
US dollar/Sterling rate. The impact of foreign exchange on
statutory operating profit was in line with this.
With an increasing proportion of HomeServe’s profits
generated overseas, the potential translation impact of
foreign exchange movements on reported profits may have
a larger impact. A ten cent movement in the FY21 average
USD rate of 1.31 and the Euro rate of 1.12 would have had
approximately a £9.1m and £5.9m impact respectively on full
year adjusted operating profit.
With respect to HomeServe’s joint venture in Japan, the
impact of future movements in the Yen is not currently
material.
Customers
HomeServe Membership’s growth strategy aims for the
business to provide its products to more homeowners.
It does this by successfully marketing its products to end
consumers and by delivering high standards of service.
HomeServe’s customer KPI measures its success in achieving
this aim.
Under IFRS 15 a customer is defined as ‘a party that has
contracted with an entity to obtain goods or services’. In
the Membership businesses where the Group acts as an
intermediary selling contracts and insurance policies to end
consumers, the ‘IFRS 15 customer’ is considered to be the
underwriter with which the Group has contracted to sell
policies. The Glossary at the end of this announcement
provides further detail on customer definitions and the
associated affect this has on revenue recognition.
Foreign exchange impact
Average exchange rate
Revenue
Adj. operating profit
Effect on (£m)
North America 1
France
Spain
Home Experts 2
Total International
$
€
€
€
2021
1.31
1.12
1.12
1.12
2020
1.27
1.15
1.15
1.15
Change
3%
(3%)
(3%)
(3%)
2021
(20.1)
3.3
4.2
0.2
(12.4)
2021
(4.8)
1.1
0.5
(0.1)
(3.3)
1 North America comprises US dollar denominated earnings from Membership & HVAC – North America and eLocal.
2 Home Experts is reported in GBP due to the different currencies used by the operating businesses within the segment. This table shows the impact of foreign exchange movements in
the Euro for the results of Habitissimo.
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021
52
Strategic report
Section 172(1) statement
Section 172(1) statement
Duty to promote the success of the Company
The purpose of this Strategic report is to
inform members of the Company and
help them assess how the directors have
performed their duty under section 172.
This section 172(1) statement incorporates
information from other areas of the Annual
Report to avoid unnecessary duplication.
Statement
The Directors have had regard for the matters set out in
section 172(1)(a) - (f) of the Companies Act 2006 (s172(1))
when performing their duty under section 172. The Directors
consider that they have acted in good faith in the way
that would be most likely to promote the success of the
Company for the benefit of its members as a whole, while
also having regard to the s172(1) matters referred to below.
It is acknowledged that it is not possible for all of the
Board’s decisions to result in a positive outcome for every
stakeholder group. When making decisions, the Board
considers the Company’s purpose, vision and values,
together with its strategic priorities and takes account of its
role as a responsible corporate citizen. By doing this, the aim
is to ensure that decisions are robust and sustainable.
Examples of matters discussed in the year by the Board and
their impact on, amongst others, employees, customers and
shareholders are included in the table below and discussed
throughout the Strategic report and in the Governance
section on pages 2 to 123.
The table below identifies where, in the Annual Report,
information on the issues, factors and stakeholders the
Board has considered in respect of Section 172(1).
THE BOARD HAS HAD REGARD TO THE FOLLOWING MATTERS:
WHERE YOU CAN FIND OUT MORE
Long-term results – the likely consequences of any decision in the
long-term
Example: the Board reviewed the Group’s strategy during the year and
concluded that it remains appropriate to support the long-term success
of the Company. Shorter-term expectations in respect of the strategy
are approved as part of the budget process, against which performance
is then monitored. Decisions taken during the year are made in the
context of the strategy and with regard to the Group’s capital allocation
model.
Our workforce – the interests of our employees
Example: our people are critical to the success of our business and the
Board has ultimate responsibility for ensuring the Group’s decisions
consider their interests. This has been particularly apparent over the last
year in respect of our response to the COVID pandemic. We have been
focused on the longer-term and none of our people has been made
redundant as a result of the pandemic and we have not accessed any
government assistance.
Our business relationships – the importance of developing the
Group’s business relationships with suppliers, customers and others
Example: managing these relationships is critical in ensuring the Group
delivers on its strategy. These relationships were also tested by the
COVID pandemic and steps taken to ensure that our Membership
customers were supported if they were facing financial hardship. In
addition, in respect of our trades (tradespeople), monthly subscriptions
were suspended in the months when they were unable to work due to
lockdown restrictions.
STRATEGIC REPORT
Chairman’s statement
Chief Executive’s review
Market overview
Business model and strategy
Key performance indicators
Principal risk and uncertainties
Viability statement
GOVERNANCE
Board leadership and company purpose
STRATEGIC REPORT
Business model and strategy
Responsible business
GOVERNANCE
Board leadership and company purpose
Nomination Committee report
People Committee report
STRATEGIC REPORT
Market overview
Business model and strategy
Responsible business
GOVERNANCE
Board leadership and company purpose
4
6
10
12
18
32
54
63
12
20
63
76
79
10
12
20
63
HomeServe plc Annual Report & Accounts 2021
Strategic report
Section 172(1) statement
53
THE BOARD HAS HAD REGARD TO THE FOLLOWING MATTERS:
WHERE YOU CAN FIND OUT MORE
The community and our environment – the impact of the Group’s
operations on the community and the environment
STRATEGIC REPORT
Responsible business
Example: the Group seeks to have a positive impact on the
communities in which it operates and reduce its impact on the
environment. During the year we established a new Group Corporate
Responsibility Committee to assist in providing some focus to our
strategy. The Board approved an Environment Policy and targets and
also a Responsible Business Policy. In response to the pandemic, free
emergency jobs were offered to NHS workers in the UK during the first
lockdown.
Our reputation – our desire to maintain our reputation for high
standards of business conduct
Example: during the year, the Group has reviewed its Code of Business
Conduct and the Executive Committee and the People Committee
have been closely involved in the development of the HomeServe Way.
Our shareholders – the need to act fairly as between members of the
Company
Example: the Board seeks to ensure that communications are clear and
its actions are in accordance with the Group’s stated strategic aims to
promote the long-term success of the Company. During the course
of the pandemic, we have successfully adapted the way in which we
engage with shareholders and as a result, have been able to engage
with many more of our investors.
STRATEGIC REPORT
Chairman’s statement
Chief Executive’s review
Responsible business
STRATEGIC REPORT
Chairman’s statement
Responsible business
GOVERNANCE
Chairman’s overview
Board leadership and company purpose
Directors’ report
20
4
6
20
4
20
58
63
119
STRATEGIC REPORT HomeServe plc Annual Report & Accounts 2021
54 Strategic report
Viability statement
HomeServe plc Annual Report & Accounts 2021
Viability statement
In accordance with provision 31 of the UK Corporate
Governance Code July 2018, the Directors have assessed
the viability of the Group over a three-year period to
31 March 2024. The Directors believe that a three-year
forward-looking period is appropriate as it is aligned to the
timeframe that management focus upon, the performance
period in respect of the long-term incentive scheme for
senior management, and it is the period of assessment for
recoverable values of cash generating units.
The Group has a formalised process of budgeting, reporting
and review along with procedures to forecast its profitability,
capital position, funding requirements and cash flows.
These plans provide information to the Directors on
a regular and timely basis and are used to ensure the
adequacy of resources available for the Group to meet its
business objectives, both on a short-term and strategic basis.
The plans for the period commencing on 1 April 2021 were
initially reviewed by the Executive Committee in February
2021 and subsequently approved by the Board in
March 2021.
Through FY21, trading in the Membership and HVAC
businesses remained very resilient against the backdrop
of the COVID pandemic, with the Group retention rate
increasing compared to FY20 and marketing activity
resuming in early summer 2020 in all markets with take-up
rates in line with the Directors’ expectations.
The initial impact of stay-at-home restrictions on the
Group’s Home Experts businesses was more pronounced,
with the core customer base - tradespeople providing
largely non-emergency services - unable to access
homes, and therefore work. However, whilst the Group’s
territories have subsequently seen further rolling stay-at-
home restrictions since the initial lockdown measures of
spring 2020, in all cases, tradespeople have been able to
access homes to perform non-emergency services, which
combined with strong consumer demand in the Group’s
Home Experts businesses since summer 2020 has seen
these businesses return to good growth.
As such, though uncertainty related to the future course of
the impact of the pandemic remains, which provides for a
more cautious outlook, the operating environment for the
Group’s businesses has sufficiently stabilised such that the
formal budgeting process for the period commencing
1 April 2021 proceeded without the need for further specific
scenario modelling related to the pandemic.
In making this year’s Viability statement, the Board also
carried out a robust assessment of the principal risks
facing the Group. The Principal Risk and Uncertainties set
out the principal strategic, operational and financial risks
which could threaten HomeServe’s business model, future
performance and growth plans and its liquidity or solvency.
HomeServe has a robust risk management framework
(
See page 32 Principal risk and uncertainties) which
addresses its risk appetite and Risk Policy and continues to
review both emerging risks and opportunities.
One such evolving area, presenting both risks and
opportunities, is that of climate change. National
governments are increasingly considering the requirement
to de-carbonise residential heating as part of their Net
Zero commitments. This legislative agenda also brings
opportunities however, as homeowners will require support
and specialist technical skills - such as those offered by the
UK Membership business – as they seek to transition to less
carbon-intensive forms of residential heating.
All major risks are scored based on their potential impact
and likelihood and are reviewed regularly by the Audit & Risk
Committee.
Various severe but plausible stress tests have been
performed both on individual and combined scenarios
which modelled:
•
the impact of the loss of a key partnership in the
Membership business
•
the impact of reduced customer focus across the Group
• market disruption from a new competitor, with particular
reference to North America, the Group’s largest current
opportunity
•
the impact of new or amended regulation and legislation
•
•
the impact of losing a key underwriting relationship in the
Membership business
the impact of further national lockdowns resulting from
the continuation of the pandemic, in line with existing
arrangements whereby trades are still able to work in
consumers’ homes.
HomeServe plc Annual Report & Accounts 2021
Strategic report
Going concern
55
Going concern
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the strategic report.
The Directors have reviewed the Group’s budget, forecast
and cash flows for 2022 and beyond, and concluded that
they are in line with their expectations with regards to
HomeServe’s strategy and future growth plans. In addition,
the Directors have reviewed the Group’s position in respect
of material uncertainties and have concluded that there are
no items that would affect going concern or that should be
separately disclosed.
The Directors have concluded that they have a reasonable
expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future.
For this reason, they continue to adopt the going concern
basis in preparing the financial statements.
David Bower
Chief Financial Officer
18 May 2021
Stress tests indicated that no single scenario would impact
the viability of the Group over the next three years. As might
be expected the impact increases if different risks were to
materialise simultaneously or continue for longer. However,
given the nature and relative diversification of the business in
terms of both geography and the Group’s Global business
lines, it is considered unlikely that such scenarios in sufficient
number would occur. In such scenarios HomeServe would
also be able to take decisions to protect the profitability of
the business over a three-year period by, for example:
• choosing to move where it allocates its resources
• choosing to reduce its investment of resources
considered more discretionary in nature e.g. scaling back
marketing investment to offset any reductions in income
• ensuring direct costs are flexed in line with operating
volumes e.g. front line engineers and call centre staff
• choosing to reduce the size and scale of back office
functions to match any reductions in income.
The Directors’ assessment has been made with reference to
a number of factors which both individually and collectively
can help mitigate or reduce any threat to its ongoing viability.
These include, for example:
•
the geographical spread of HomeServe’s operations
• a large and diverse portfolio of commercial partnerships
• high customer retention
• a strong financial position with over £570m of headroom
in its debt facilities at 31 March 2021
• historic and ongoing compliance with all banking
covenants
• a small, but increasing, contribution from other business
lines with Home Experts and HVAC each growing
revenues this financial year.
The business is geographically spread across the UK,
Continental Europe, North America and has a developing
presence in Japan. In each established territory, the
business has long-term contractual relationships with utility
businesses providing access to 118m households under
Utility Partner brands. Retention rates are high across all
established businesses, resulting in stable and recurring cash
flows from a large, diverse base of 8.3m customers.
Considering the Group’s current position, the principal
risks and the Board’s assessment of the Group’s future,
the Directors have a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities
as they fall due over a period of at least three years to
31 March 2024.
STRATEGIC REPORT
56 Strategic report
Non-financial information statement
HomeServe plc Annual Report & Accounts 2021
Non-financial information statement
The Group seeks to comply with the Non-financial Reporting requirements as detailed in the Companies Act 2006. The
below table, and information it refers to, is intended to help stakeholders understand our position on key non-financial
matters.
Copies of policies referred to in the table can be accessed online:
www.homeserveplc.com/who-we-are/governance/policies
REQUIREMENT
Anti-bribery and
anti-corruption
OUR POLICIES
WHERE YOU CAN FIND OUT MORE
Financial Crimes and Sanctions
Whistleblowing
See page 24 Responsible business.
Employees
Code of Business Conduct
See page 24 Responsible business.
Environment
Group Environmental Policy
See page 30 Responsible business.
Human rights
HomeServe does not currently have a
human rights policy but all businesses
are expected to comply with key policies
regarding e.g. employment rights and equal
opportunities.
See page 24 Responsible business.
Social activities
Responsible Business Policy
See page 24 Responsible business.
Description of the principal
risks and impact of business
activity
Description of the business
model
Non-financial Key
performance indicators
n/a
n/a
n/a
STRATEGIC REPORT 2021
For and on behalf of the Board
RICHARD HARPIN
Founder and Chief Executive
18 May 2021
See page 32 Principal risk and uncertainties.
See page 12 Business model and strategy.
See page 18 Key performance indicators.
Governance
Contents
57
Using our skills to
support the communities
we touch
We want our
people and partners
to be proud to be
associated with us
Governance
Corporate governance statement
Chairman’s overview
Compliance and other statements
Board leadership and company purpose
Division of responsibilities
Composition, succession and evaluation
Board of Directors
Executive Team
Nomination Committee report
People Committee report
Audit, risk and internal control
Audit & Risk Committee report
Directors’ remuneration report
Remuneration at a glance
Annual statement
Directors’ remuneration policy
Annual report on remuneration
Directors’ report
Statements of responsibilities
Independent Auditor’s report
58
60
63
67
71
71
73
76
79
81
84
92
93
97
105
119
122
124
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 58 Governance
Chairman’s overview
Chairman’s overview
“I feel proud to be handing over
to Tommy Breen a Board that
understands the need to be
accountable to our shareholders for
ensuring that governance processes
are in place and are effective, and
which is fully committed to meeting
the required standards of corporate
governance.”
JM BARRY GIBSON
Dear Shareholder
I am pleased to present this year’s Corporate governance report which is my last as Chairman. As a Board, we continue to
believe that good corporate governance and doing business responsibly underpin good business performance. I feel proud
to be handing over to Tommy Breen a Board that understands the need to be accountable to our shareholders for ensuring
that governance processes are in place and are effective, and which is fully committed to meeting the required standards of
corporate governance.
Purpose and Board focus
Our purpose is to make home repairs and improvements easy, and I believe that clarity of purpose makes it easier for the
Board to operate and make decisions.
During the year the Board continued to focus on promoting a disciplined approach to investing for growth, guided by
our purpose and our ambition to be able to do every job, in every home but we have also increasingly focused on our
responsibilities, particularly in respect of our environmental impact. I was pleased to be able to take on the role of Chairman
of a newly formed Group Corporate Responsibility Committee, made up of representatives from our operating businesses,
which has been instrumental in developing our plans. The Board has now approved our Environment Policy and targets
along with a Responsible Business Policy. I believe that formalising our ESG approach in this way is a positive step in
demonstrating our commitment to these important issues.
Operational resilience and future growth have been key themes at our meetings during FY21. We are encouraged by the
progress being made at Checkatrade and continue to believe in our growth prospects in North America. Considerable time
has been spent discussing international development and having carefully considered our options, the Board agreed that
adopting a ‘near neighbour’ strategy focusing on adjacent territories such as Canada, Belgium and Portugal was the optimum
way to proceed.
I feel it is always important to review past decisions as well as looking to the future. The Board’s review of our investment
in the eServe customer relationship management system in the UK led us to conclude that we should write down that
investment and move forward in a different way, taking into account the learnings from our other Membership businesses.
Leadership and board effectiveness
As a Board, we need to ensure that we have the right people and leadership to deliver our strategy and plans. Talent is an
ongoing challenge in a growing business and the Board and the People Committee have encouraged management to
ensure that we have the right resource to support our stretching plans for growth. We are making good progress in identifying
new talent and in developing our internal talent.
I am proud of how the business has reacted to the COVID pandemic. The way in which the leadership team and the
workforce rose to the multiple uncertainties presented by the crisis epitomised our three key cultural behaviours of courage,
persistence and integrity.
HomeServe plc Annual Report & Accounts 2021 Governance
Chairman’s overview
59
It has been a testing year for all Boards and like others, we have had to change the way we operate to accommodate local
lockdowns. Board meetings by video have been a real learning opportunity but I feel we have faced the change positively and
have been able to maintain an engaged and supportive environment in our virtual Boardroom. It is a credit to the Board that
we have been able to recruit a new Chairman, Tommy Breen, a new Executive Director, Ross Clemmow and a new Non-
Executive Director, Roisin Donnelly, while working remotely. We are all looking forward to a time when we can meet together
in one physical location.
During the year, a questionnaire-based review of the Board and its committees was facilitated by Lintstock Limited. Further
detail on the review is provided on page 75. Based on this review and my experience as Chairman, I am satisfied that the
Board and its Committees are performing efficiently and that there is an appropriate balance of skills, experience, knowledge
and independence to enable the Board to discharge its duties effectively.
Board changes
I will be stepping down as Chairman on 18 May 2021 and Tommy Breen will take over. He is an experienced non-executive
director and until 2017 was Chief Executive of DCC plc, the FTSE 100 listed international sales, marketing and support services
group, where he spent a highly successful 30 year career. A chartered accountant by training, Tommy brings to HomeServe
an extensive track record of delivering sustainable growth in a diverse, international business, both organically and by
acquisition. Tommy joined the Board on 27 January 2021 and he and I have been working closely together since then to
achieve a smooth handover of responsibilities.
In March, we welcomed Ross Clemmow as CEO EMEA and Roisin Donnelly as a Non-Executive Director. Ross brings
considerable digital and consumer expertise to HomeServe’s Executive team. Since 2019, he has fulfilled the dual role of
CEO of WiggleCRC, the international online sports retailer, and Managing Director within the Operational Support Group of
Bridgepoint, where he has been responsible for improving digital capability across Bridgepoint’s portfolio. Prior to this, Ross
held senior retail management roles at Debenhams and Argos. Ross’s appointment frees up Tom Rusin to focus on a US-
based role as Chief Executive, North America, with responsibility there for Membership and HVAC. Tom retains global product
responsibility for utility-based Membership.
Roisin spent 30 years with Procter & Gamble and has undertaken advisory roles with Facebook, John Lewis and Coca-Cola
European Partners, along with non-executive positions with family owned, private equity backed and listed businesses and
this has enabled her to add immediate value to our Board discussions.
Future outlook
The COVID pandemic has created great uncertainty for businesses across the world and there will no doubt be further
difficult times ahead. Our appreciation of our homes has never been greater which means our purpose of making home
repairs and improvements easy has never been more relevant. I feel sure that continued discipline and focus at Board level
will help HomeServe thrive despite the challenging environment and I wish all of my colleagues every success in the future.
JM Barry Gibson
Chairman
18 May 2021
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 60 Governance
Compliance and other statements
Compliance and other statements
Compliance with the UK Corporate Governance Code
The principles set out in the UK Corporate Governance Code (‘the Code’) emphasise the value of good corporate
governance to the long-term sustainable success of listed companies. These principles, and the supporting provisions
cover five broad themes and the Board is responsible for ensuring that the Company has appropriate frameworks in place to
comply with the requirements of the Code.
The Board believes that throughout FY21, the Company has applied the principles and complied with the majority of the
relevant provisions of the Code. We did not comply with provisions 9 and 19 as our Chairman, Barry Gibson has served on the
Board since 2004 and has been Chairman since 2010. Barry steps down from the Board on 18 May 2021 and will be replaced
as Chairman by Tommy Breen who joined the Board in January 2021 and is independent. In addition, we did not comply with
provision 38 as the pension contributions paid in respect of two of our Executive Directors are not aligned to those available
to the workforce. Pension contributions for the Directors concerned will be reduced to the level of the workforce at the end
of December 2022.
The Code is available at www.frc.org.uk
Application of UK Corporate Governance Code Principles
The Code has placed increased emphasis on “apply and explain” with regard to the Principles of the Code. Our explanations
about how we have applied the main principles of the Code can be found as follows:
Board leadership and company purpose
Principle A
A successful company is led by an effective and entrepreneurial board,
whose role is to promote the long-term sustainable success of the
company, generating value for shareholders and contributing to wider
society.
Strategic report pages 2 to 56.
Governance pages 57 to 123.
Directors’ remuneration report pages 92 to 118.
Principle B
The board should establish the company’s purpose, values and strategy,
and satisfy itself that these and its culture are aligned. All directors must
act with integrity, lead by example and promote the desired culture.
Principle C
The board should ensure that the necessary resources are in place for
the company to meet its objectives and measure performance against
them. The board should also establish a framework of prudent and
effective controls, which enable risk to be assessed and managed.
Strategic report pages 2 to 56.
Board leadership and company purpose pages
63 to 66.
Division of responsibilities pages 67 to 70.
Directors’ remuneration report pages 92 to 118.
Responsible business pages 20 to 31.
Principal risks and uncertainties pages 32 to 37.
Section 172(1) statement pages 52 to 53.
Audit, risk and internal control pages 81 to 83.
Audit & Risk Committee report pages 84 to 91.
Principle D
In order for the company to meet its responsibilities to shareholders and
stakeholders, the board should ensure effective engagement with, and
encourage participation from, these parties.
Responsible business pages 20 to 31.
Section 172(1) statement pages 52 to 53.
Shareholder relations page 66.
Principle E
The board should ensure that workforce policies and practices are
consistent with the company’s values and support its long-term
sustainable success. The workforce should be able to raise any matters of
concern.
Responsible business pages 20 to 31.
Section 172(1) statement pages 52 to 53.
Board leadership and company purpose pages
63 to 66.
Directors’ remuneration report pages 92 to 118.
HomeServe plc Annual Report & Accounts 2021
Governance
Compliance and other statements
61
Division of responsibilities
Principle F
The chair leads the board and is responsible for its overall effectiveness in
directing the company. They should demonstrate objective judgement
throughout their tenure and promote a culture of openness and debate.
In addition, the chair facilitates constructive board relations and the
effective contribution of all non-executive directors, and ensures that
directors receive accurate, timely and clear information.
Principle G
The board should include an appropriate combination of executive and
non-executive (and, in particular, independent non-executive) directors,
such that no one individual or small group of individuals dominates
the board’s decision-making. There should be a clear division of
responsibilities between the leadership of the board and the executive
leadership of the company’s business.
Principle H
Non-executive directors should have sufficient time to meet their board
responsibilities. They should provide constructive challenge, strategic
guidance, offer specialist advice and hold management to account.
Principle I
The board, supported by the company secretary, should ensure that it
has the policies, processes, information, time and resources it needs in
order to function effectively and efficiently.
Composition, succession and evaluation
Principle J
Appointments to the board should be subject to a formal, rigorous
and transparent procedure, and an effective succession plan should be
maintained for board and senior management. Both appointments and
succession plans should be based on merit and objective criteria and,
within this context, should promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.
Principle K
Board leadership and company purpose pages
63 to 66.
Division of responsibilities pages 67 to 70.
Division of responsibilities pages 67 to 70.
Board biographies pages 71 to 72.
Board leadership and company purpose pages
63 to 66.
Division of responsibilities pages 67 to 70.
Audit & Risk Committee report pages 84 to 91.
Responsible business pages 20 to 31.
Board leadership and company purpose pages
63 to 66.
Division of responsibilities pages 67 to 70.
Audit, risk and internal control pages 81 to 83.
Audit & Risk Committee report pages 84 to 91.
Directors’ remuneration report pages 92 to 118
Nomination Committee report pages 76 to 78.
Composition, succession and evaluation
page 71 to 80.
The board and its committees should have a combination of skills,
experience and knowledge. Consideration should be given to the length
of service of the board as a whole and membership regularly refreshed.
Board biographies pages 71 to 72.
Principle L
Annual evaluation of the board should consider its composition, diversity
and how effectively members work together to achieve objectives.
Individual evaluation should demonstrate whether each director
continues to contribute effectively.
Nomination Committee report pages 76 to 78.
Composition, succession and evaluation
page 71 to 80.
Audit, risk and internal control
Principle M
The board should establish formal and transparent policies and
procedures to ensure the independence and effectiveness of internal
and external audit functions and satisfy itself on the integrity of financial
and narrative statements.
Audit, risk and internal control pages 81 to 83.
Audit & Risk Committee report pages 84 to 91.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 62 Governance
Compliance and other statements
Compliance and other statements
Audit, risk and internal control
Principle N
The board should present a fair, balanced and understandable
assessment of the company’s position and prospects.
Strategic report pages 2 to 56.
Audit, risk and internal control pages 81 to 83.
Audit & Risk Committee report pages 84 to 91.
Financial statements pages 136 to 207.
Principle O
The board should establish procedures to manage risk, oversee the
internal control framework, and determine the nature and extent of the
principal risks the company is willing to take in order to achieve its long-
term strategic objectives.
Principal risks and uncertainties pages 32 to 37.
Viability statement pages 54 to 55.
Audit, risk and internal control pages 81 to 83.
Audit & Risk Committee report pages 84 to 91.
Remuneration
Principle P
Remuneration policies and practices should be designed to support
strategy and promote long-term sustainable success. Executive
remuneration should be aligned to company purpose and values, and
be clearly linked to the successful delivery of the company’s long-term
strategy.
Strategic report pages 2 to 56.
Board leadership and company purpose pages
63 to 66.
Directors’ remuneration report pages 92 to 118.
Principle Q
A formal and transparent procedure for developing policy on executive
remuneration and determining director and senior management
remuneration should be established. No director should be involved in
deciding their own remuneration outcome.
Principle R
Directors should exercise independent judgement and discretion when
authorising remuneration outcomes, taking account of company and
individual performance, and wider circumstances.
Directors’ remuneration report pages 92 to 118.
Directors’ remuneration report pages 92 to 118.
Viability and going concern
Statements in respect of viability and going concern are set out on pages 54 to 55.
Robust assessment of emerging and principal risks
The Board confirms that it has carried out a robust assessment of the emerging and principal risks facing the Group (including
those which would threaten the business model, future performance, solvency, liquidity or reputation), its appetite with
respect to those risks and the systems required to mitigate and manage them. Details on the review process are set out on
pages 88. Further details on the emerging and principal risks and uncertainties can be found on page 32 to 37.
Annual review of systems of risk management and internal control
The Board monitored the Group’s systems of risk management and internal control and carried out a review of their
effectiveness. The Board concluded that overall, these systems were effective. Details on the review process are set out on
pages 81 to 83.
Fair, balanced and understandable
The Directors consider that, taken as a whole, this Annual Report is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s position, performance, business model and strategy. Details on
the process for arriving at this conclusion are set out on page 88.
Section 172(1)
The Directors have performed their duty under Section 172(1) of the Companies Act 2006. The statement on how this duty
has been fulfilled is contained in the Strategic report on pages 52 to 53.
HomeServe plc Annual Report & Accounts 2021
Governance
Board leadership and company purpose
63
Board leadership and company purpose
The Board
The Board is responsible for the effective leadership and long-term success of the Group and our purpose is at the heart of
Board discussions. As a Board we regularly discuss and review:
• Our business model and its sources of value that give us advantage
• Our business performance and our progress towards our strategic goals
• Our customers and how we can ensure that they are at the heart of everything we do
• Our people and how we can develop and support them to provide the service our customers expect
• Our stakeholders and how we engage with them
• Our governance and controls.
HomeServe’s business model is based on five key sources of value – partnerships, marketing expertise, customer service,
local networks and financial resources and expertise. The Board discusses all of these, and their potential impacts, on a
regular basis but the focus changes depending on business priorities and where the biggest potential lies. This year, the Board
has spent time reviewing and challenging our growth plans, particularly in North America and Home Experts. There has also
been continued focus on the plan to acquire HVAC businesses in each of our territories with the Board regularly reviewing
the development of the strategy along with the performance of acquired businesses.
As well as looking for new opportunities, the Board also reviews existing activity and considers whether there is anything
that the business should stop doing. During the year, having reviewed the international development opportunities and
considered whether the capital allocation to this activity would create the most value for shareholders, it was agreed
that international development should be limited in the near term to adjacent territories. As a result of this decision, the
international business development team was disbanded.
There has been increased focus on our role as a responsible business over the last year and the Board has spent time
discussing and agreeing a new Environment Policy and targets and a framework for a Responsible Business Policy. The
Whistleblowing Policy has also been reviewed and a decision taken to move the reporting hotline to a new provider with the
aim of making it easier for our people to access the service and share any concerns. In addition, a Group wide approach to
Modern Slavery has been discussed and a new statement agreed.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 64 Governance
Board leadership and company purpose
Board leadership and company purpose
Continued
Board activity in FY21
Strategy, operations and finance
• Received regular updates from the Executives on trading
• Discussed opportunities for automation
performance
• Approved the annual budget and business plan
• Reviewed and approved the Group’s FY20 and half year
• Reviewed our investment in the eServe customer
relationship management system and agreed to write it
down
FY21 results (including dividends)
• Received regular updates on M&A activity
• Approved the FY20 Annual Report (including a fair,
• Received updates on technology related developments
balanced and understandable assessment) and 2020 AGM
Notice
• Reviewed the Group’s debt, capital and funding
arrangements including the US private placement funding
• Received updates on business plans and strategic
initiatives (Checkatrade, Membership, Habitissimo)
• Considered a number of international development
opportunities and agreed to focus on adjacent territories.
• Discussed and evaluated the ongoing delivery of the
HVAC strategy
• Discussed the competitor landscape
• Reviewed and discussed customer insight from a
number of the Group’s businesses.
Leadership and people
ESG
• Reviewed the succession plan for the Non-Executive
• Approved a Responsible Business Policy
• Discussed environmental strategy and approved a new
policy and targets for our scope 1 & 2 carbon footprint
• Received updates on ESG activity in each of the
businesses.
Directors
• Considered organisational design and approved changes
required to deliver the Group’s strategy including the
appointment of Ross Clemmow as CEO EMEA to allow
Tom Rusin to focus on the growth opportunity in North
America
• Discussed the talent pipeline and in particular, how
diversity could be improved
• Received regular updates from the Chair of the People
Committee
• Received updates on health & safety.
Internal control and risk management
Governance and legal
• Reviewed the principal risks and uncertainties
• Received updates on corporate governance
• Reviewed and confirmed the Group’s viability statement
developments
and going concern status
• Reviewed the matters reserved for the Board and the
• Reviewed and validated the effectiveness of the Group’s
terms of reference of its Committees
systems of internal controls and risk management
• Received reports on engagement with investors and
• Considered and approved the Group’s tax strategy.
other stakeholders
• Conducted an externally facilitated evaluation of the
Board’s effectiveness and discussed the outcome
• Received regular reports from the Chair of the Audit &
Risk Committee.
HomeServe plc Annual Report & Accounts 2021 Governance
Board leadership and company purpose
65
Our purpose, values and culture
Our purpose is to make home repairs and improvements easy and this is underpinned by our values. The culture set by the
Board is intended to deliver performance and growth whilst maintaining high standards of business conduct. Central to our
focus on culture has been the development of the HomeServe Way (see page 25) which sets out the essential behaviours,
skills and knowledge needed to be effective at HomeServe, based on the fundamentals of courage, persistence and integrity.
Stella David has been appointed as the designated workforce engagement Director and also chairs the People Committee.
This activity is covered in the People Committee report on pages 79 to 80.
The People Committee reviews the results of the regular employee engagement surveys and uses these reviews as the
principal means of assessing the culture across the Group. Questionnaires are completed by employees on an anonymous
basis and the process is facilitated by an external provider. More informal feedback is provided through the International
People Forum which is made up of representatives from each of our businesses and meets regularly with Stella David.
The Board gains valuable insight and feedback from the Executive Directors in respect of the culture and behaviour across
the Group and the internal audit function also considers culture as part of its reviews.
Our stakeholders
Engagement with our main stakeholders is summarised on pages 20 and 21 of the Strategic report.
Our business environment presents us with opportunities and challenges and it is vital for the Board to respond to these while
continuing to grow our business and maintain our reputation. The Board seeks to understand the views of our stakeholders
and engage with many of them to ensure that stakeholder interests can be considered during our discussions and decision
making.
The importance and influence of stakeholder groups differs depending on the matter being discussed. It is possible for
stakeholder interests to conflict and when this happens, the Board uses its judgement to reach a final decision.
The Board is advised of stakeholder views in a number of different ways:
• The monthly business review
• Business updates
• Presentations on strategic developments
• People Committee updates
• Succession plans
• Employee engagement survey results
• Annual General Meeting
• Corporate governance and regulatory development updates
• Presentations from external advisers and internal experts.
Detailed below are some examples of matters discussed during the year and how the Board considered our stakeholder
groups.
Matter discussed
COVID
pandemic
response
Stakeholder groups
considered
Shareholders,
employees,
customers,
community,
government
How the Board or Committee had regard to stakeholders
Decisions
Consideration was given to:
• how we could maintain our services to
customers (particularly vulnerable customers)
during the crisis
• how we could keep our workforce safe
• how our core skills could be leveraged to support
key workers
• supporting our members and trades during
•
financially uncertain times
the impact of these decisions on our ability
to deliver our strategic plans and returns for
shareholders.
Decision taken not to furlough
staff, to launch services to support
health workers in the UK during
the crisis, to provide support for
Membership customers facing
financial hardship and suspending
payment of subscriptions for
Home Experts trades who were
unable to work during lockdown.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 66 Governance
Board leadership and company purpose
Board leadership and company purpose
Continued
Stakeholder groups
considered
Shareholders,
employees
Matter discussed
Reviewing the
international
development
strategy
How the Board or Committee had regard to stakeholders
Decisions
Consideration was given to:
•
investment opportunities elsewhere in the Group
•
the use of people resources
the risks in respect of entry into new countries
•
• use of our capital and the impact on returns for
shareholders.
Decision taken to focus
international development on
adjacent territories which can be
managed by existing businesses.
Agreeing the
Environment
Policy and
targets
The
environment,
shareholders,
employees,
government
the impact of our operations on the environment
Consideration was given to:
•
• government regulations and targets
• our reputation from a shareholder and employee
A new policy was agreed along
with a target in respect of our
Scope 1 and 2 carbon footprint.
perspective.
Relations with shareholders
The Board, on the Company’s behalf, recognises the need to maintain an active dialogue with its shareholders. The Chief
Executive and Chief Financial Officer meet regularly with institutional investors and analysts to discuss the Company’s
performance and all shareholders have access to the Chairman and the other Directors, who are available to discuss any
questions which they may have in relation to the running of the Company. Given the interest in the growth in North America,
Tom Rusin, the CEO for that region, has also attended a number of meetings during the year.
During the year, there was a comprehensive programme of virtual meetings with large and small institutional investors
which included both current and potential shareholders. All major shareholders were given the opportunity to meet with
the Chairman during the year and three chose to do so. In addition, the Senior Independent Director (who chairs the
Remuneration Committee) met with one shareholder.
We ensure that all Directors are fully aware of the views of major shareholders. Copies of all analysts’ research relating to
the Company are circulated to Directors upon publication. The Board receives a monthly Investor Relations report which
includes an analysis of the Company’s shareholder register as well as any feedback received from shareholders and analysts.
Feedback is actively sought following the Interim and Preliminary Results presentations for discussion by the Board. Such
feedback is very helpful in developing the narrative and data for subsequent presentations.
All resolutions were passed at the 2020 AGM with no significant adverse feedback received.
The Board encourages shareholders to attend the Annual General Meeting and is always willing to answer questions, either
in the meeting itself or, more informally, afterwards. In addition, shareholders may contact HomeServe direct, either through
the website or by telephone.
Whistleblowing
A Whistleblowing Policy is in place and allows employees, franchisees and sub-contractors who wish to raise any issues
of concern relating to the Group’s activities to do so on a confidential basis by contacting an external hotline. The decision
was taken during the year to change the provider of the external hotline with a view to making it easier to access and to raise
concerns. The Policy was also reviewed during the year and is available on our website: www.homeserveplc.com/who-we-
are/governance/policies
All reports are formally investigated by the Assurance & Risk Director with support from relevant functions within the business.
Incidents and their outcomes are reported to the Audit & Risk Committee and the Board. A number of calls were made to the
external hotline during the year and management action was taken where appropriate. No issues were raised that required
any direct action from the Board.
HomeServe plc Annual Report & Accounts 2021 Governance
Division of responsibilities
67
Division of responsibilities
The Chairman of the Board, Barry Gibson, is responsible for the effectiveness of the Board. He was independent on his
appointment as Chairman in 2010 and will be stepping down on 18 May 2021. He will be succeeded by Tommy Breen
who joined the Board as an Independent Non-Executive Director in January 2021.
The roles of the Chairman, Chief Executive and Senior Independent Director are clearly defined and written specifications
are available on our website: www.homeserveplc.com/who-we-are/governance
Chairman
Key responsibilities
Chief Executive Officer
Senior Independent Director
• The effective running of the Board
• Management of the Group
• Supporting the Chairman on
• Direction and focus
• Developing and proposing strategy
governance issues
• Guardian of the decision making
•
Implementing Board decisions
process
• Maintaining an active dialogue with
• Providing challenge
the Chairman
• Ensuring the Board receives accurate,
timely and clear information
• Leading shareholder
communication.
• Maintaining relationships with
Executive and Non-Executive
Directors.
• Acting as a sounding board for the
Chairman and a trusted intermediary
for other Directors
• Leading the annual review of the
Chairman’s performance
• Leading the process to find a new
Chairman.
At least half of the Board, excluding the Chairman, are independent Non-Executive Directors; at the year end there were
seven Non-Executive Directors (excluding the Chairman) and four Executive Directors. Six of the Non-Executive Directors
are considered to be independent. Stella David is no longer considered to be independent as she has served on the Board
for more than nine years. Shareholders were consulted before her appointment was renewed for one final term.
When Barry Gibson steps down as Chairman on 18 May 2021, there will be six Non-Executive Directors (excluding the new
Chairman, Tommy Breen) and four Executive Directors.
Katrina Cliffe served as Senior Independent Director throughout the year.
All of the Non-Executive Directors provided independent challenge and oversight in respect of matters discussed at the
Board and played an active role in the development of the strategy. As an example, they were instrumental in the decision
taken to focus international development only in adjacent territories.
The Board
The Board has a Schedule of Matters specifically reserved to it for decision and has approved the written terms of reference
of the various Committees to which it has delegated its authority in certain matters.
Matters reserved to the Board include:
•
•
•
•
•
•
the Company’s future strategy
the approval of major financial commitments
the acquisition of significant companies or businesses
the Company’s internal controls
the recommendation or approval of dividends
the approval of preliminary and interim financial statements
• appointments to the Board and its Committees.
The full schedule is available on our website www.homeserveplc.com/who-we-are/governance
The Board has delegated certain of its responsibilities to the Committees of the Board. Further detail on the work of the
Committees is provided later in the Annual Report. The terms of reference of each of the Board’s Committees are available
on our website www.homeserveplc.com/who-we-are/governance/committees
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 68 Governance
Division of responsibilities
Division of responsibilities
Continued
Governance Framework
Shareholders
Chairman
Responsible for the effective running of the Board and guardian of the Board’s decision making process.
The Board
Responsible for providing leadership to the Group.
The Board sets strategic priorities and oversees delivery in a way that supports sustainable long-term growth, takes stakeholders into
account and maintains a balanced approach to risk within a framework of effective controls.
Board Committees
The terms of reference for each Committee are agreed by the Board. They are available in the Corporate Governance section
of the website: www.homeserveplc.com/who-we-are/governance/committees
Nomination Committee
People Committee
Audit & Risk Committee
Remuneration Committee
• Makes recommendations
to the Board on the
appointment of Directors
• Reviews the size, structure
and composition of the
Board
• Considers succession
planning arrangements for
Directors and other senior
managers.
Committee report on pages
76 to 78.
• Determines, agrees and
oversees the people
strategy for the Group
• Reviews the ongoing
appropriateness and
relevance of the people
strategy
• Reviews and makes
recommendations in
respect of the resourcing
of the people strategy.
Committee report on pages
79 to 80.
• Monitors, on behalf of the
Board, compliance with
and the effectiveness of,
the Group’s accounting
and internal control
systems
• Reviews the independence
and effectiveness of the
internal and external
auditors.
Committee report on pages
84 to 91.
• Determines the Group’s
overall remuneration
strategy
• Determines the
remuneration packages
of the Executive Directors
and other senior
management
• Approves the grant and
exercise of executive
long-term incentive
arrangements and
oversees the operation of
other share-based plans
across the Group.
Directors’ remuneration
report on pages 92 to 118.
The element on the activities
of the Remuneration
Committee on pages 105 to
118 are incorporated into this
statement by reference.
Chief Executive
Responsible for the day to day running of the Group’s business and performance and the development and implementation of strategy.
Executive Committee
Assists the Chief Executive in the performance of his duties including:
•
the development and implementation of strategy, operational plans, policies, procedures and budgets
•
the monitoring of operating and financial performance
•
the prioritisation and allocation of resource
• overseeing Group wide initiatives and investments.
HomeServe plc Annual Report & Accounts 2021 Governance
Division of responsibilities
69
Time commitment
Time commitment is discussed with prospective Non-Executive Directors as part of the recruitment process. The Board is
satisfied that all Non-Executive Directors have sufficient time to meet their commitment to the Company.
During the year, having stepped down as Chairman of C&J Clark Limited, in March 2021, Stella David was appointed as
a Non-Executive Director of Domino’s Pizza Group Plc and as Senior Independent Director of Entain plc. Having joined
the Board of N Brown plc in 2013 and served as Senior Independent Director and Chairman of the Audit Committee, Ron
McMillan became Chairman in March 2021.
Stella and Ron both discussed the proposed appointments with the Board during the recruitment process and it was agreed
that, taking into account their other commitments, both had sufficient bandwidth to take on the roles.
Executive Directors may serve as a Non-Executive Director on one other board so long as this does not interfere with their
time commitment to the Company. If they do serve, they may retain the fees. Richard Harpin is the founder and Director of
Growth Partner LLP which invests in entrepreneurs and nurtures promising businesses. The business is run on a day-to-day
basis by a Managing Partner. Ross Clemmow is a Non-Executive Director of London City Airport Limited, a position he held
before he joined HomeServe.
Board and other meetings
Eight regular meetings are usually held each year to review and monitor current and forecast performance. Regular reports
on monthly financial and operational performance and other matters of importance to the Group ensure that the Board is
supplied in a timely manner with the information necessary to make informed judgements. In addition, the Board has an
annual strategy meeting to devise and discuss the Company’s medium and long-term strategic focus and management
development strategy.
Regular formal and informal presentations are given in order to inform Directors of issues of importance affecting the Group.
Under normal circumstances, meetings of the Board are occasionally held at the Company’s operating sites other than
Walsall, to afford the Board, particularly the Non-Executive Directors, the opportunity to meet with local management.
The Chairman and Non-Executive Directors meet at least annually without the Executives. In addition, the Senior
Independent Director holds a private meeting of the Non-Executive Directors without the Chairman being present to assess
his performance.
Attendance at meetings
All Directors are expected to attend all Board and relevant Committee meetings. Details of attendance by Directors at
meetings during the year are set out in the table below. Directors who were unable to attend specific meetings reviewed
the relevant papers and provided their comments to the Chairman of the Board or Committee. Any Director who misses a
meeting will, as a matter of course, receive the minutes of that meeting for reference.
Board
Audit & Risk Committee
Remuneration Committee
Nomination Committee
People Committee
D Bower
R Clemmow
R Harpin
T Rusin
T Breen
K Cliffe
S David
R Donnelly
J M B Gibson
E Fitzmaurice
O Grémillon
R McMillan
9/9
2/2
9/9
9/9
3/3
9/9
9/9
1/1
9/9
9/9
9/9
9/9
3/3
3/3
3/3
6/6
2/2
6/6
5/6
5/6
6/6
3/3
2/2
2/2
2/3
3/3
3/3
3/3
3/3
3/3
3/3
3/3
2/3
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 70 Governance
Division of responsibilities
Division of responsibilities
Continued
Executive Committee
Members
Richard Harpin (Chairman)
Bruce Aronow
David Bower
Ross Clemmow
Deb Dulsky
Mike Fairman
Guillaume Huser
Rob Judson
John Kitzie
Anna Maughan
Fernando Prieto
Tom Rusin
Responsibilities
The day to day running of the business rests with the Group Chief Executive, Richard Harpin. The Executive Committee
assists the Chief Executive in the performance of his duties including:
•
•
•
•
the development and implementation of strategy, operational plans, policies, procedures and budgets
the monitoring of operating and financial performance
the prioritisation and allocation of resources
the oversight of group wide initiatives and investments.
The Committee has adopted formal terms of reference which are available on our website www.homeserveplc.com/who-
we-are/governance/committees
Short biographies of the members of the Executive Committee who are not on the Board, are set out on page 73.
HomeServe plc Annual Report & Accounts 2021 Governance
Composition, succession and evaluation
71
Composition, succession and evaluation
Board of Directors
1
5
9
2
6
3
7
4
8
10
11
12
1
JM Barry Gibson (69)
Chairman
3
David Bower (49)
Chief Financial Officer
Appointed to the Board: April 2004
Appointed as Chairman: April 2010 (stepping down in May 2021)
Committee memberships: Nomination (Chair), Remuneration, People
Barry was previously Group Retailing Director at BAA plc, Group Chief
Executive of Littlewoods plc and Non-Executive Director of Somerfield
plc, National Express plc, William Hill plc, SSP Group Ltd, bwin.party digital
entertainment plc and Non-Executive Chairman of Harding Brothers
Holdings Ltd.
Key areas of experience and contribution: Retailing, travel, leisure, general
management with strong leadership skills
Principal current external appointments: Chairman of Entain plc
Appointed to the Board: February 2017
Committee memberships: Executive, People
David was appointed as Chief Financial Officer in February 2017. He joined
HomeServe in 2005 and has undertaken a number of senior divisional
and group finance roles including spending six years as Group Finance
Director. Before HomeServe, he spent 12 years at Arthur Andersen, where
he qualified as a Chartered Accountant, and then later Deloitte LLP.
Key areas of experience and contribution: Substantial experience in
accountancy, audit, investor relations and mergers and acquisitions
Principal current external appointments: None
2
Richard Harpin (56)
Chief Executive
4
Ross Clemmow (46)
CEO, EMEA
Appointed to the Board: May 2001
Committee memberships: Executive, People
Richard is the Founder and Chief Executive of HomeServe, which was
set up in 1993 as a joint venture with South Staffordshire Group. Also the
founder and Non-Executive Director of Growth Partner LLP, investing
in and helping small consumer businesses to step change their growth
and the Enterprise Trust, a charity that encourages young enterprise,
apprenticeships and SME’s. Previously a brand manager with Procter &
Gamble, followed by management consultancy with Deloitte and his own
company.
Key areas of experience and contribution: Consumer marketing,
management consultancy, entrepreneurship and strong leadership skills
Principal current external appointments: Founder and Director of Growth
Partner LLP
Appointed to the Board: March 2021
Committee memberships: Executive
Prior to joining HomeServe, Ross fulfilled the dual role of CEO of
WiggleCRC, the international online sports retailer, and Managing Director
at Bridgepoint, where he was responsible for improving digital capability
across Bridgepoint’s portfolio. Prior to Bridgepoint, Ross held senior roles
in digital retail with Argos & Debenhams and in consulting with Bain &
Company. Ross started his career at Procter & Gamble in marketing.
Key areas of experience and contribution: Digital transformation, multi
channel strategy, consumer marketing, private equity
Principal current external appointments: London City Airport Limited
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 72 Governance
Composition, succession and evaluation
Composition, succession and evaluation
Board of Directors
5
Tom Rusin (52)
CEO, North America
Appointed to the Board: May 2017
Committee memberships: Executive, People
Tom was appointed as CEO North America in 2021 following almost three
years as Global CEO, HomeServe Membership and nearly seven years as
Chief Executive Officer, HomeServe USA. Previously at Affinion Group
where he undertook a number of roles culminating in three years as
President and Chief Executive Officer of Affinion Group’s North American
Division. Before joining Affinion, he owned Just for Travel Inc. He was
previously a Non-Executive Director of The Ambassador’s Group.
Key areas of experience and contribution: Affinity marketing, extensive
general management experience with people focused leadership skills
Principal current external appointments: None
6
Tommy Breen (62)
Non-Executive Director (Independent)
Appointed to the Board: January 2021 (takes over as Chairman in May 2021)
Committee memberships: Nomination, Remuneration, People
A chartered accountant by training and an experienced non-executive
director, until 2017 Tommy was Chief Executive of DCC plc, the FTSE 100
listed international sales, marketing and support services group, where he
spent a highly successful 30 year career.
Key areas of experience and contribution: Significant experience delivering
sustainable growth in a diverse, international business, both organically and
by acquisition
Principal current external appointments: Senior Independent Director of
Essentra plc
7
Katrina Cliffe (54)
Senior Independent Director (Independent)
Appointed to the Board: May 2017
Committee memberships: Remuneration (Chair), Audit & Risk, Nomination,
People
Katrina was previously General Manager at American Express Global
Business Travel, EMEA, having been General Manager, Global Corporate
Payments, UK. Prior to American Express she held senior roles at Lloyds
TSB Group PLC, Goldfish Bank Ltd and MBNA International Bank.
Key areas of experience and contribution: Extensive sector relevant
experience in financial and membership services in international consumer
focused businesses, experience on other risk, audit and remuneration
committees
Principal current external appointments: Non-Executive Director of London
and Country Mortgages Limited and Naked Wines plc
8
Stella David (58)
Non-Executive Director (Not Independent)
Appointed to the Board: November 2010
Committee memberships: People (Chair)
Stella spent seven years as Chief Executive Officer of William Grant & Sons
following more than 15 years with Bacardi Ltd where she undertook a
number of roles including Regional President and culminating in five years
as Global Chief Marketing Officer. She was a Non-Executive Director for
seven years at Nationwide Building Society and for nine years at C&J Clarks
Limited.
Key areas of experience and contribution: Marketing, drinks industry,
experience in international consumer focused businesses and valuable
leadership experience as a CEO
Principal current external appointments: Non-Executive Director of Bacardi
Ltd, Norwegian Cruise Line Holdings and Domino’s Pizza Group Plc and
Senior Independent Director of Entain plc
9
Roisin Donnelly (59)
Non-Executive Director (Independent)
Appointed to the Board: March 2021
Committee memberships: People
Roisin spent over thirty years at Procter & Gamble. Having joined the
business as an assistant brand manager, her last position was CMO of P&G,
Northern Europe leading 72 brands across 6 markets. Prior to this she was
UK CMO for P&G, leading the biggest media budget in the UK and leading
digital and marketing innovation. She is a former non-executive director
of two privately-owned businesses, Holland and Barrett Ltd and Bourne
Leisure Holdings Ltd, and served as a non-executive director of Just Eat plc
from 2016 to 2020.
Key areas of experience and contribution: Marketing, significant experience
leading transformation and turnaround including major acquisitions and
divestments, international
Principal current external appointments: Adviser to the Internet Advertising
Bureau Ltd
10
Edward Fitzmaurice (58)
Non-Executive Director (Independent)
Appointed to the Board: May 2017
Committee memberships: Audit & Risk, Nomination, Remuneration
Edward was previously Chief Executive Officer of Hastings Insurance Group
and part of the MBO team of that business in 2009. He served as the Non-
Executive Chairman of Hastings Insurance Services Ltd until October 2015
and a Non-Executive Director of Hastings Group Holdings plc until March
2017. Prior to joining Hastings, he spent three years at HomeServe as Chief
Executive of HomeServe Warranties. His earlier career was spent at Dixons
plc and Anglo American.
Key areas of experience and contribution: Retailing, insurance, significant
operational experience leading consumer focused businesses in regulated
sectors
Principal current external appointments: None
11
Olivier Grémillon (41)
Non-Executive Director (Independent)
Appointed to the Board: March 2019
Committee memberships: Remuneration
Olivier is currently Vice President, Global Segments, at Booking.com. He
was previously the Managing Director for Europe, the Middle East and
Africa at Airbnb, having joined them as the Country Manager for France. He
started his career in strategy consulting and worked for both Deloitte and
McKinsey & Company.
Key areas of experience and contribution: Marketing, international
development, product development, strategy and platform businesses
Principal current external appointments: Vice President, Global Segments,
Booking.com
12
Ron McMillan (68)
Non-Executive Director (Independent)
Appointed to the Board: October 2017
Committee memberships: Audit & Risk (Chair), Remuneration, Nomination,
People
A Chartered Accountant, Ron worked in PwC’s assurance business for 38
years and has extensive knowledge and experience in auditing, financial
reporting and governance. During his time at PwC, his roles included
Global Finance Partner, Chairman of the North of England and Deputy
Chairman and Head of Assurance for the Middle East.
Key areas of experience and contribution: Significant experience in
accountancy and audit and as chair of other audit committees
Principal current external appointments: Senior Independent Director and
Chairman of the Audit Committee of SCS PLC and B&M European Value
Retail SA. Chairman of N Brown PLC
HomeServe plc Annual Report & Accounts 2021 Governance
Composition, succession and evaluation
73
Executive Team
13
17
14
18
15
19
16
20
13
Bruce Aronow (55)
CEO, eLocal
17
Rob Judson (37)
Global Chief Automation Officer, Membership
Committee memberships: Executive
Bruce has served as Chief Executive Officer, eLocal, since 2008. Before
eLocal, under the umbrella of Affiliated Managers Group, Bruce served as
Managing Partner of Managers Investment Group and COO/CFO of Rorer Asset
Management for ten years. Prior to that, Bruce spent over eleven years at PwC
specialising in financial services where he left as a Partner.
Key areas of prior experience: Lead generation, digital marketing, finance and
operations, investment management
Principal current external appointments: Member of the Board of Trustees for the
Copeland Capital Funds and the PFM Multi-Manager Series Trust.
Committee memberships: Executive
Rob was appointed as Global Chief Automation Officer in January 2021
following two years as Global COO for HomeServe Membership. Rob began his
HomeServe career in the UK in 2003, spending the first eight years in a variety
of roles progressing from a front line contact centre employee to Head of
Outsourcing in the UK. In 2011 Rob moved to HomeServe North America and
assumed responsibility for the service delivery network, contact centre operations
and customer experience across North America as EVP Customer Experience.
Key areas of prior experience: Customer experience, service delivery, contact
centres, IT strategy, automation
Principal current external appointments: Trustee for Walsall FC Community Fund
14
Deb Dulsky (50)
Global CEO, HVAC
18
John Kitzie (67)
CEO, HomeServe UK
Committee memberships: Executive
Deb was appointed as Global CEO, HVAC in November 2018 following nearly
eight years in leadership positions at HomeServe USA, most recently as Chief
Strategy Officer. Prior to joining HomeServe, Deb led the Marketing Solutions
division in the Americas of Williams Lea and served in a number of roles in
M&A and business development at Affinion Group. She was previously a Non-
Executive Director of The Ambassadors Group.
Key areas of prior experience: Business development, M&A, marketing,
international
Principal current external appointments: None
Committee memberships: Executive
John joined HomeServe in 2012, initially as Chief Operating Officer and
subsequently as CEO of HomeServe North America. He was appointed as CEO
of HomeServe UK in September 2020. Prior to joining HomeServe, he served
as Executive Vice President of Global Operations for Affinion Group where he
was responsible for contact centres, fulfilment, merchandising, supply chain,
procurement and telecommunications. Before joining Affinion Group, he served
as President of Savemart and Senior Vice President of Vcommerce.
Key areas of prior experience: Retail, merchandise, service delivery, partner
management
Principal current external appointments: None
15
Mike Fairman (54)
CEO, Checkatrade
19
Anna Maughan (51)
Company Secretary
Committee memberships: Executive
Mike was appointed as Chief Executive Officer, Checkatrade in October 2018.
Before joining HomeServe he was CEO of mobile phone network giffgaff noted
for its pioneering online, community powered business model. Prior to giffgaff,
Mike undertook a number of roles in O2 including starting and running O2’s
home broadband business. His early career was focused on marketing in the soft
drinks and pet food sectors.
Key areas of prior experience: Marketing, digital transformation, entrepreneurial
start-ups
Principal current external appointments: None
Appointed as Company Secretary: July 2008
Committee memberships: Executive
Anna started her career at Severn Trent plc and joined South Staffordshire plc as
Assistant Company Secretary in 1996. Following the demerger of HomeServe
plc and South Staffordshire plc in 2004 she continued as Assistant Company
Secretary of HomeServe plc, becoming Company Secretary in 2008.
Key areas of prior experience: Company secretarial, pensions
Principal current external appointments: Trustee of, and Secretary to, the industry
wide Water Companies Pension Scheme
16
Guillaume Huser (54)
CEO, HomeServe France
20
Fernando Prieto (55)
CEO, HomeServe Spain
Committee memberships: Executive
Guillaume was appointed as Chief Executive Officer, HomeServe France in
April 2015. Previously at Affinion Group where he undertook a number of roles
culminating in four years as President of Affinion Group’s International Division.
Before joining Affinion in December 2002, he spent 13 years at American Express
firstly in finance, sales and business development roles and later in the Corporate
Services Division where he was VP Commercial Card, Western Europe.
Key areas of prior experience: Financial services, business development, affinity
marketing, international
Principal current external appointments: None
Committee memberships: Executive
Fernando was appointed as Chief Executive Officer, HomeServe Spain in February
2018 having joined the Spanish claims business in 2008, undertaking a number
of senior roles including Managing Director. Before joining HomeServe he
undertook a number of roles in the insurance sector for CASER and MAPFRE
including Chief Actuary, Business Development Director and Chief Marketing
Officer.
Key areas of prior experience: Insurance, marketing, business development
Principal current external appointments: Trustee of Fundación Area XXI
GOVERNANCEHomeServe plc Annual Report & Accounts 2021
74 Governance
Composition, succession and evaluation
Composition, succession and evaluation
Continued
Board composition
When Barry Gibson steps down on 18 May 2021, the Board will be comprised of seven Non-Executive Directors (including
the Chairman) and four Executive Directors. The Non-Executive Directors have a diverse range of skills and experience which
enables them to oversee business performance and provide constructive challenge. The Executive Directors have extensive
commercial, financial and operational experience both within HomeServe and beyond.
Short biographies of each of the Directors, including their membership of Committees, are set out on pages 71 to 72.
Board development
New members of the Board receive a tailored induction organised by the Company Secretary which usually includes visits
to the different territories and operations. During the year, a comprehensive programme of video meetings was provided
for new Directors and the intention is that once travel is once again permitted they will also complete some in person visits.
Where required, training on legal and regulatory responsibilities is also provided.
On an ongoing basis, Directors are encouraged to highlight specific areas where they feel their skills or knowledge would
benefit from further development.
Succession
We recognise the importance of ensuring that there is an appropriate pool of talented and capable individuals to fill senior
roles and a succession planning process has been established across the Group to facilitate this. The process identifies
emergency, short-term and long-term successors for each role and therefore allows any training and development
requirements or recruitment issues to be highlighted. Each business and corporate function prepares and maintains
succession plans with the support of local and Group People functions and with input from the Group Chief Executive. The
Executive Committee regularly discusses the plans and the Board as a whole reviews the high level plan at least annually.
Length of tenure of Chairman and
Non-Executive Directors
Board Independence
Board Gender Diversity
3
3
1
4
1
8
1
5
4
4
3
3
0 - 3
years
3 - 6
years
10+
years
Executive Director
Chairman
Non-Executive (Independent)
Non-Executive (Non Independent)
0
M F
Total board
M F
Executive
M F
Non-Executive
The data reflects the position as at May 2021 when JM Barry Gibson steps down.
HomeServe plc Annual Report & Accounts 2021 Governance
Composition, succession and evaluation
75
Board evaluation
The Board has implemented a formal process for reviewing its own effectiveness, that of its Committees and its individual
members. The Board evaluation is facilitated by Lintstock Limited. Lintstock Limited has no other connection with the
Company or to individual Directors.
Online questionnaires are completed by all Directors on an annual basis and responses are collated into a report which is
discussed at a Board meeting. Every third year, Lintstock interview all of the Directors so that any themes can be developed
and feedback investigated in more depth. Interviews were last conducted in FY18. The questionnaires cover topics such as
board composition and dynamics, strategic and operational oversight, risk management and internal control, succession
planning and human resources as well as priorities for change.
As a result of the FY20 review, the main areas identified by the Board for continued focus and the actions taken were as
follows:
Area of focus
Actions taken
The process to identify a successor to the Chairman and
implement a more formal succession plan for the Non-
Executives
The monitoring and challenge of technological and digital
programmes
Ongoing, in-depth monitoring of the competitive
environment and the changing needs of customers.
• Recruitment of a new Chairman was completed
• A succession plan was developed for the Non-
Executives and discussed by the Board in July 2020
• A recruitment process was started in respect of new
Non-Executives and one appointment was made.
• An external review was completed in respect of the
programme to replace the customer relationship
management system in the UK and presented to the
Board
• Updates were provided to the Board in respect of the
other technology programmes being delivered
• A detailed review of the competitive environment was
discussed at the Board Strategy Meeting and actions
agreed in respect of ongoing monitoring
• An interactive session on customer needs was
presented at the Board Strategy Meeting.
In FY21, Directors completed online evaluation questionnaires in December 2020 and Lintstock compiled a formal written
report summarising the Directors’ views. This report was discussed by the Board in February 2021. Key findings included:
• a high overall level of satisfaction with the functioning of the Board, the competence and capabilities of the Directors
•
•
and the quality of relationships between members of the Board
the level of support and challenge provided by the Board to management was viewed positively
the performance of the Committees was rated positively including the nature of the work undertaken on behalf of the
Board.
It was agreed that key priorities for FY22 should be:
• ensuring that the new Chairman was given the support needed to make his appointment a success
• continued focus on the Non-Executive pipeline including the need for increased diversity
• continued provision of insight in respect of the less prominent stakeholders.
It was acknowledged that the Board had not had the opportunity to engage as much as usual with the workforce and
management below Board and it was agreed that once lockdowns across the world were eased and travel was permitted
again, meetings in different locations would be arranged.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 76 Governance
Composition, succession and evaluation
Composition, succession and evaluation
Nomination Committee report
“This has been a busy year in respect of
board appointments and our efforts to
improve the diversity of the Board will
continue into FY22.”
JM BARRY GIBSON
I am pleased to present the Nomination Committee report for the year ended 31 March 2021. This has been a busy year in
respect of board appointments and our efforts to improve the diversity of the Board will continue into FY22.
Members
J M Barry Gibson (Chairman – stepping down on 18 May 2021)
Tommy Breen (appointed 26 March 2021, Chairman from 19 May 2021)
Katrina Cliffe
Edward Fitzmaurice
Ron McMillan
Responsibilities
The primary responsibilities of the Committee are to:
• make recommendations to the Board on the appointment of Directors
•
review the size, structure and composition of the Board
• consider succession planning arrangements for Directors and other senior managers.
The Committee has adopted formal terms of reference which are available on our website
www.homeserveplc.com/who-we-are/governance/committees
Key issues considered during the year
Three searches were undertaken during the year and three appointments were made.
A specific sub-committee of the Board was appointed in FY20 to commence a search for a new Chairman. The process was
led by Katrina Cliffe, our Senior Independent Director and the other members of the sub-committee were Ron McMillan,
Stella David, Edward Fitzmaurice and Richard Harpin. The relationship between Chairman and Chief Executive Officer is of
paramount importance and it was therefore agreed that it was vital to ensure that Richard’s views could be considered early in
the process.
Three leading consultants were interviewed and Spencer Stuart were selected to assist in the search. Spencer Stuart has
undertaken both non-executive and executive searches for the Group. It has no other current connection to HomeServe or
to individual Directors. Spencer Stuart is a signatory to the Voluntary Code of Conduct for Executive Search Firms.
Spencer Stuart spoke to all members of the Board in order to inform the candidate specification which included having
served as a chief executive of a substantial business, international exposure and non-executive experience. They then
presented a long list of candidates for consideration. The sub-committee met to consider the long list and agree which
potential candidates should be approached. A series of interviews were then held and the short-listed candidates met with all
other Board members. Following this, the Nomination Committee met and agreed that a recommendation be made to the
Board that Tommy Breen be appointed.
HomeServe plc Annual Report & Accounts 2021 Governance
Composition, succession and evaluation
77
Tommy is an experienced non-executive director and until 2017 was Chief Executive of DCC plc, the FTSE 100 listed
international sales, marketing and support services group, where he spent a highly successful 30 year career. A chartered
accountant by training, Tommy brings to HomeServe an extensive track record of delivering sustainable growth in a diverse,
international business, both organically and by acquisition. Tommy joined the Board on 27 January 2021 and he and I have
been working closely together since then to achieve a smooth handover of responsibilities.
Our second key search during the year was in respect of the position of CEO, EMEA. The Board recognises the potential
for growth in North America and it was felt that Tom Rusin’s role as CEO for Global Membership meant that there was not
enough dedicated focus on this important market. It was decided that it would be beneficial to allow Tom to focus purely on
North America and to recruit someone to take responsibility for the UK, French and Spanish Membership businesses and any
new territory openings.
Spencer Stuart led the search and potential candidates were interviewed by a cross section of the Board with the short-listed
candidates also being given the opportunity to meet other Senior Executives. A recommendation was made to the Board
that Ross Clemmow be appointed and he joined the Board on 22 March 2021. Ross brings considerable digital and consumer
expertise to HomeServe’s Executive team. From 2019, he fulfilled the dual role of CEO of WiggleCRC, the international online
sports retailer, and Managing Director within the Operational Support Group of Bridgepoint, where he was responsible
for improving digital capability across Bridgepoint’s portfolio. Prior to this, Ross held senior retail management roles at
Debenhams and Argos.
Following discussions on the Non-Executive succession plan, it was agreed that we should take a longer-term approach
to Non-Executive recruitment to ensure that there was a good balance of new and more established Non-Executives on
the Board at any one time. The Committee interviewed three leading consultants and Russell Reynolds were selected to
work with us on a search. Russell Reynolds has previously undertaken non-executive searches for the Group. It has no
other current connection to HomeServe or to individual Directors. Russell Reynolds is a signatory to the Voluntary Code of
Conduct for Executive Search Firms.
Having reviewed a long list, the Committee interviewed a number of candidates before selecting a small number for the short
list. The short-listed candidates met with all Board members and the feedback was considered by the Committee. As a result
of this process, a recommendation was made to appoint Roisin Donnelly and she joined the Board on 25 March 2021.
Roisin spent 30 years with Procter and Gamble and has undertaken advisory roles with Facebook, John Lewis and Coca-Cola
European Partners, along with non-executive positions with family owned, private equity backed and listed businesses and
this has enabled her to add immediate value to our Board discussions.
Succession planning
We recognise the importance of ensuring that there is an appropriate pool of talented and capable individuals to fill senior
roles and a succession planning process has been established across the Group to facilitate this. The process identifies
emergency, short-term and long-term successors for each role. The Executive succession plan was considered by the
Committee in January 2021.
The Board effectiveness survey in FY20 identified the need to develop a succession plan for our Non-Executive Directors
to ensure that we could maintain the independence of the Board through a good balance of those individuals with some
years of experience of HomeServe and those with a fresh perspective. A plan was therefore drafted and reviewed by the
Board. We agreed that we needed to be more active in terms of managing the pipeline for Non-Executive Directors and we
commenced recruitment activity which focused very much on improving the diversity of our Board. This activity continues.
Diversity
We are committed to ensuring that our Board is appropriately diverse and that it reflects diversity in its broadest sense. A
combination of demographics, skills, experience, race, age, gender, educational and professional background and other
relevant personal attributes will ensure our Board is effective. We believe that diversity of experience and personal strengths
are as important as diversity of gender and social and ethnic backgrounds. Our Board Diversity Policy is available on our
website: www.homeserveplc.com/media/ykdbtzao/homeserve-plc-board-diversity-policy.pdf
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 78 Governance
Composition, succession and evaluation
Composition, succession and evaluation
Nomination Committee report continued
All relevant factors are taken into consideration when evaluating the skills, knowledge and experience needed to fill each
Board vacancy. When recruiting, we require diversity on our long and short lists and in particular, ensure that appropriately
qualified women are included on all short lists.
When I step down, 27% of the Board will be female. We recognise the target for FTSE350 companies to move towards 33%
female representation and will use our best endeavours to further increase the number of female Board members over the
next year. A recruitment process is under way.
Last year we committed to accelerating our focus on improving the gender balance of our global senior leadership team and
we agreed to work towards 33% female representation on a combined basis across our Board, Executive Committee and
their direct reports by March 2021, moving us towards the targets set out in the Hampton Alexander report. I am disappointed
to report that at the year end, we had 27% female representation in that group but our efforts to improve the position will
continue.
We appreciate that achieving the targets set out in the Hampton Alexander report is only a first step along the journey to a
more diverse workforce and we recognise that we also need to take steps to achieve the targets set out in the Parker report.
We are working with an external consultant to benchmark our performance and develop a rigorous strategic framework to
improve our performance in respect of all forms of diversity.
More information on talent and diversity is provided in the Strategic report on pages 25 to 26.
JM Barry Gibson
Chairman
18 May 2021
HomeServe plc Annual Report & Accounts 2021 Governance
Composition, succession and evaluation
79
Composition, succession and evaluation
People Committee report
“It has not been an easy year for our
workforce; our office based staff have
had to adapt to working remotely and
our people in the field have faced their
own challenges whilst continuing to
support our customers.”
STELLA DAVID
I am pleased to present the People Committee report in respect of the year ended 31 March 2021. It has not been an easy
year for our workforce; our office based staff have had to adapt to working remotely and our people in the field have faced
their own challenges whilst continuing to support our customers. From a Committee perspective, I have been keen to ensure
that we were able to hear from the workforce about how they felt the business was handling the COVID pandemic whilst
continuing to move forward with the matters on the People Committee agenda.
Members
Stella David (Chairman)
Tommy Breen (appointed 26 March 2021)
Katrina Cliffe
Roisin Donnelly (appointed 26 March 2021)
J M Barry Gibson (stepping down on 18 May 2021)
Ron McMillan
David Bower
Richard Harpin
Tom Rusin
Responsibilities
The primary responsibilities of the Committee are to:
• determine, agree and oversee the people strategy for the Group
•
•
•
review the ongoing appropriateness and relevance of the people strategy
review and make recommendations in respect of the resourcing of the people strategy
review and oversee the employee engagement strategy.
The Committee has adopted formal terms of reference which are available on our website: www.homeserveplc.com/who-
we-are/governance/committees
Key issues considered during the year
The People Committee met three times during the year. In addition to the members of the Committee, the Group People
Director and the Company Secretary attended all Committee meetings.
Discussions during the year have been focused on the following:
• Our talent strategy including the development of apprenticeships through the HomeServe Foundation
• Diversity & inclusion
• Employee engagement including targets and action plans
• Leadership development including the embedding of the HomeServe Way.
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Composition, succession and evaluation
Composition, succession and evaluation
People Committee report continued
The global talent strategy aims to drive the attraction, growth and retention of a deep pool of talented employees with the
right capabilities to deliver our growth strategy. We are particularly focused on developing internal talent and are committed
to achieving a target of 70% internal hires for senior leadership roles.
Ensuring that our future senior leadership team better reflects the diversity of the markets we serve and the people we
employ is a key objective of our global talent strategy. In common with many organisations, we are starting this journey by
focusing on a plan to drive gender diversity within our current senior leadership team and in the succession pipeline. We
recognise that diversity is much broader than gender but believe that achieving sustainable traction in this critical area of
talent will help us develop strategies that can be applied more widely.
The Committee has been closely involved in the UK team’s plans to establish an apprenticeship academy under the auspices
of the HomeServe Foundation. Skilled and experienced tradespeople are central to our purpose and there is currently a
shortage of such people in all of our territories. Offering apprenticeships directly and in partnership with our trades and sub-
contractors allows us to invest in the future and ensure that we can keep delivering the needs of our customers.
As the Group continues to expand through the acquisition of small HVAC businesses, the Committee also took the
opportunity to consider how this activity is changing the make up of our workforce. 25% of our people now work in HVAC
and for many of them, joining HomeServe is their first experience of the corporate environment. We want to ensure that the
experience is a positive one where their businesses are supported to grow and prosper and are able to benefit from being
part of a larger Group.
Workforce engagement
I am the nominated Non-Executive Director in respect of workforce engagement and, to support me in that role, we have
established an International People Forum. The Forum is made up of representatives from each of our businesses and it
met twice during the year. The feedback from the Forum has been invaluable during this unusual year as they have been
able to explain how people were feeling during the pandemic; initially while adjusting to working from home in many cases
and more recently while facing a return to the office. Their thoughts and opinions have influenced the plans adopted by the
Group in respect of remote working and have fed into the content and frequency of the communications issued throughout
the year.
It was heartening to hear from the Forum that they all felt very positive about how HomeServe had handled the crisis and
were grateful for the efforts made to ensure that everyone could keep working safely while supporting our customers.
The Forum received a presentation on the work being undertaken by an external consultant on diversity and inclusion and I
fully expect to have an interesting debate with them when the results of the initial workstream are available.
The Forum was pleased to have the opportunity to discuss executive remuneration with Katrina Cliffe, the Chairman
of the Remuneration Committee. Katrina explained the structure of executive remuneration packages and why the
structure differed when compared to the remuneration packages offered to the rest of the workforce. They welcomed the
transparency of the information provided and felt that they had gained a better understanding of the remuneration policy,
particularly the requirement for Executive Directors to invest in HomeServe shares.
The Forum has now been established for well over a year and the hope is that we will be able to meet in person again during
FY22. We will also be reviewing the membership of the Forum and considering whether we can extend it to ensure that
frontline and operational roles are better represented.
Stella David
Chairman
18 May 2021
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Audit, risk and internal control
81
Audit, risk and internal control
Board assessment of risk management and internal control
The Board has overall responsibility for the Group’s system of risk management and internal control including the setting
of risk appetite. The Audit & Risk Committee has a key role to play in overseeing risk management and internal controls
and advising the Board. More detail in respect of the role of the Audit & Risk Committee is provided in the report of that
Committee on pages 84 to 91.
The Board is responsible for reviewing the effectiveness of risk management and internal control systems and specifically
that:
• There is an ongoing, systemised process for identifying, evaluating and managing the principal risks faced by the Group
• This system has been in place for the year under review and up to the date of approval of this Annual Report
• The system is regularly reviewed by the Board
• The system accords with the Financial Reporting Council (‘FRC’) guidance on risk management, internal control and
related financial and business reporting.
During the year, the Board has directly, or through the Audit & Risk Committee, overseen and reviewed the development
and performance of risk management activities and practices and the systems of internal control in place across the Group.
As a result, the Board is satisfied that the risk management and internal control systems that are in place remain robust and
effective.
The Board delegated the responsibility for conducting the work required for it to provide the ‘fair, balanced and
understandable’, ‘going concern’ and ‘viability’ statements to the Audit & Risk Committee. In conducting this work, the Audit &
Risk Committee acts on behalf of the Board and its activities remain the responsibility of the Board.
The relevant Board statements on these matters are set out on pages 54 to 55 and page 88. The principal risks and
uncertainties are set out on pages 32 to 37.
System of risk management and control
The system of internal control is designed to manage and mitigate rather than eliminate the risk of failure to achieve business
objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board has
delegated the day-to-day management of the Group to the Group Chief Executive and the other Executive Directors.
The risk governance model is based on ‘three lines of defence’ as follows:
1st line of defence
A risk management framework is in place which includes the agreed risk appetite, policies and procedures. The Group’s
management operates a formal process for identifying, managing and reporting on the operational and financial risks
faced by each of the Group’s businesses. Risks are reviewed in detail at local risk committees and, on an overall basis, by the
Executive Committee and the Audit & Risk Committee. Support is provided by the 2nd line of defence oversight functions.
2nd line of defence
Oversight is provided by the various control functions including risk, compliance and specialist functions such as health &
safety and information security. The 2nd line provides advice to the Board and the Audit & Risk Committee on risk appetites,
review of risk ratings and action plans and reports on risk management.
3rd line of defence
The Group has a dedicated internal audit function and a formal audit plan is in place to address the key risks across the
Group and the operation and effectiveness of internal controls. The function reports to the Board through the Audit & Risk
Committee.
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Audit, risk and internal control
Continued
Risk management cycle
Risk appetite
Risk appetite is defined as the amount and type of risk we are willing to pursue or retain in order to meet our strategic
objectives. Our assessment of risk appetite is guided by our vision and mission and informed by our strategic objectives.
It is used as a measure against which all of our current and proposed activities are tested.
Risk appetite is reviewed annually to ensure that it is aligned with strategy.
Risk framework
A risk framework is in place across the Group which includes risk appetite, materiality scoring matrices and key risk indicators.
Each business is expected to adhere to the Group risk framework and to report regularly on its risk registers and key risk
indicators but, if appropriate, the Group framework may be customised to local requirements as long as minimum standards
are met. A mechanism exists to extend the Group’s risk framework to any significant new business that is acquired or
established immediately upon acquisition or start-up.
Risk assessment and risk registers
Our assessment of risk is approached from both a top down and a bottom up perspective. Through the Executive
Committee, we identify Group Enterprise Risks which are those risks that directly link to our business model and strategy.
At a local level, each business identifies strategic and operational risks which are captured on detailed risk registers. Local
businesses are also required to ensure that risks designated by the Group to be ‘critical’ risks are actively managed. These are
risks where compliance with a minimum level of control is considered to be non-negotiable (an example of a ‘critical’ risk is
health & safety). Best practice in respect of identifying and mitigating ‘critical’ risks is shared across the Group.
All risks are assessed in respect of likelihood and impact based on the materiality matrix included in the Group risk framework.
Risks are then scored on a gross and net basis and rated as red, amber or green. Consideration is given to whether risks are
within or outside appetite and particular attention is given to the controls that are in place and the actions being taken to
mitigate the risks. Incidents are recorded and reported on at the relevant committees.
Risk registers are reviewed at local committees and boards across the Group with the Executive Committee and the Audit &
Risk Committee having regular oversight of both the Group Enterprise Risks and the principal risks identified by each business.
Risk oversight
Oversight of the risk management process is provided by the Assurance & Risk Director, local risk and compliance teams, the
Audit & Risk Committee and, ultimately, the Board.
Internal control
Internal audit acts as the 3rd line of defence. In order to ensure the independence of the internal audit function, the
Assurance & Risk Director’s primary reporting line is to the Chairman of the Audit & Risk Committee.
The internal audit function fulfils its role and responsibilities by delivery of the annual, risk-based audit plan. There are no
restrictions on the scope of internal audit’s work.
A report is issued after each audit which provides an opinion on the control environment and details any issues found.
Internal audit then work with the businesses to agree remedial actions which are tracked to completion.
The Assurance & Risk Director submits reports to local boards and committees and attends those meetings as required. He
attends and reports to every Audit & Risk Committee meeting.
Financial reporting
Three year business plans, annual budgets and investment proposals for each business are formally prepared, reviewed and
approved by the Board.
A clearly defined organisation structure is in place with clear lines of accountability and appropriate division of duties. The
Group’s financial regulations specify authorisation limits for individual managers and for local boards, with all material
transactions being approved by the Board.
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Consolidated financial results, including a comparison with budgets and forecasts, are reported to the Board on a monthly
basis, with variances being identified and understood so that mitigating actions can be implemented, where appropriate.
Ahead of the financial results being presented to the Board, monthly business review calls are held, attended by Executives,
representatives from the Group finance function and local senior management. These calls provide an opportunity for a
detailed review of performance and to identify any issues or trends.
Half year and annual consolidated accounts are prepared and verified by the finance team and reviewed by the Executive
Directors and the external auditor. The accounts are then considered by the Audit & Risk Committee which makes a
recommendation in respect of their approval to the Board. The Board then reviews and approves the accounts prior to the
announcement of the half year and annual results.
The Board considers that the processes undertaken by the Audit & Risk Committee are appropriately robust, effective and
in compliance with the guidelines issued by the FRC. During the year, the Board has not been advised by the Audit & Risk
Committee on, or identified itself, any failings, fraud or weaknesses in internal control which have been determined to be
material in the context of the financial statements.
Viability statement
The approach to the viability statement and the statement itself are set out on pages 54 to 55.
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Audit & Risk Committee report
Audit & Risk Committee report
“The Audit & Risk Committee is an
important element of the Group’s
governance structure and embraces
its role in protecting the interests of
shareholders as regards the integrity of
the published financial information and
the effectiveness of audit.”
RON MCMILLAN
I am pleased to present the Committee’s report for the year ended 31 March 2021. The Committee is an important element
of the Group’s governance structure. Our role is to review and advise the Board on financial reporting including the various
statements made in the Annual Report on viability, going concern, risk and controls and whether, when read as a whole, the
Annual Report is fair, balanced and understandable and provides the information necessary for shareholders to assess the
Group’s performance, business model and strategy.
Members
Ron McMillan (Chairman)
Katrina Cliffe
Edward Fitzmaurice
All members of the Committee are independent Non-Executive Directors and the Committee as a whole has competence
relevant to our sector. I have recent and relevant experience in respect of my role. I am a chartered accountant and worked
in PwC’s assurance business for 38 years, with 28 years as an audit partner, and have extensive knowledge and experience in
auditing, financial reporting and governance. During my time at PwC, my roles included Global Finance Partner, Chairman of
the North of England and Deputy Chairman and Head of Assurance for the Middle East. I also chair the Audit Committees of
SCS PLC and B&M European Value Retail SA.
All members of the Committee have an understanding of financial reporting, relevant corporate legislation, the functions
of internal and external audit and the regulatory and compliance framework of the Group. Katrina Cliffe brings relevant
experience in financial services and has recently served on risk and audit committees elsewhere. Edward Fitzmaurice has
extensive relevant experience of retail and insurance having served as Chief Executive Officer of Hastings Insurance Group.
The internal and external auditors, the Chief Financial Officer, the Chief Executive Officer and the Chairman are invited, but
are not entitled, to attend all meetings. Where appropriate, other Executive Directors and managers also attend meetings
at the Chairman’s invitation. The external and internal auditors are provided with the opportunity to raise any matters or
concerns that they may have, in the absence of the Executive Directors, whether at Committee meetings or, more informally,
outside of them.
Board reporting
I provide an update to the Board after each Committee meeting and the minutes of meetings are circulated to the whole
Board.
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Committee Effectiveness
The effectiveness of the Committee is reviewed as part of the annual Board review process facilitated by Lintstock. The FY21
review concluded that the Committee was operating effectively and benefited from a high quality cycle of work.
Responsibilities
The primary responsibilities of the Committee are to:
• monitor, on behalf of the Board, compliance with and the effectiveness of, the Group’s accounting and internal control
systems
•
•
review the independence of the external auditor and agree their terms of engagement and remuneration
review the scope of and outputs from the external audit
• approve the scope of the work undertaken by and the outputs from the work done by internal audit
• make recommendations to the Board on accounting policies and their application
•
•
•
review critical judgements and key sources of estimation uncertainty as reflected in the financial statements
review the annual and interim financial statements before they are presented to the Board
review the Group’s overall risk appetite, tolerance and strategy
• monitor, on behalf of the Board, current and emerging risk exposures
•
receive reports from compliance functions and review and approve the means by which the Group seeks to comply with
its regulatory obligations.
The Committee has adopted formal terms of reference which are available on our website
www.homeserveplc.com/who-we-are/governance/committees
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Audit & Risk Committee report
Continued
Summary of meetings in the year
The Committee usually meets three times in the year and did so in FY21. Details of meeting attendance are set out on page
69. The timing of Committee meetings is arranged to accommodate the release of financial information, the approval of
the external and internal audit plans and the review of the outputs of those plans. In addition to scheduled meetings, I met
with the CFO and members of his team, the Assurance & Risk Director and the external auditor on a number of occasions to
receive updates on activity.
Items discussed
Financial Reporting
Full year results
Interim results
Review of critical judgements and sources of estimation uncertainty
Fair, balanced and understandable conclusion in respect
of the Annual Report
Liquidity, viability and going concern
Consideration of new accounting standards
Internal Audit
Internal audit plan
Internal audit reports
Internal audit effectiveness and independence
External Audit
External audit plan
External audit reports
External audit effectiveness and independence
Approval of fees and review of non audit services
Risk
Risk appetite and the risk management framework
Risk registers
Other matters
Regulatory compliance activity
IT security
Post investment reviews of acquisitions
May 2020
November 2020
February 2021
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Significant issues related to the financial statements
The Committee oversees the process used by the Board to assess the going concern and viability of the Group, the stress
testing of key trading assumptions and the preparation of the viability statement which is set out on pages 54 to 55.
The Committee also satisfied itself that the disclosures in relation to accounting judgements and key sources of estimation
uncertainty were appropriate and obtained, from the external auditor, an independent view of the key disclosure issues and
risks. Management present reports to the Committee setting out the basis for the assumptions used and these reports are
then discussed and challenged by the Committee. All of the issues were also discussed with the external auditor and their
views taken into account. The Committee is satisfied that the judgements made are reasonable and appropriate disclosures
have been included in the accounts.
The Committee assessed whether suitable accounting policies had been adopted and whether management had made
appropriate estimates and judgements. The Committee also reviewed reports from the external auditor on the half year and
full year results, which provided an overview of the audit work undertaken and highlighted any issues for discussion.
HomeServe plc Annual Report & Accounts 2021
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The Conduct Committee of the Financial Reporting Council (FRC) reviewed the FY20 Annual Report to assess compliance
with reporting requirements. No questions or queries were raised as a result of the review but some improvements
to disclosures were suggested. The FRC’s letter and recommendations were considered by the Committee and the
recommendations have been taken into account when drafting this year’s Annual Report.
The significant issues considered in the year were:
Issue
How it was addressed by the Committee
Revenue recognition
As an insurance intermediary, the Company is required to
recognise revenue at the point at which a policy goes on
risk. Some elements of revenue are deferred to cover future
costs and also to provide for policies which may cancel mid
term.
Carrying value of goodwill
The total goodwill balance at 31 March 2021 of £564.3m has
been allocated to the relevant cash generating units (CGUs)
and tested for impairment by comparing the carrying value
of net assets (including allocated goodwill and acquisition
intangibles) with the value in use, defined as the present
value of future cash flows attributable to the CGUs.
Business combinations
During the year the Group completed a number of
acquisitions.
eServe impairment costs
A review of the eServe system has been completed
and having assessed the position, it was agreed that
development should be halted and customers migrated
back onto the legacy system, Ensura. As a result, an
impairment review was completed which concluded that
the carrying value of eServe and the associated asset was
fully impaired.
Exceptional items
In addition to the impairment of eServe, redundancy costs
have arisen as a result of the refocusing of the business
including in respect of the change in strategy relating to
international development.
COVID impact
The COVID pandemic has had an impact in all of
HomeServe’s territories.
Brexit impact
All of the HomeServe businesses trade exclusively within
their own borders and the Group is not exposed to any cross
border transactional currency risk.
The Committee satisfied itself that the accounting policies for revenue
are compliant with IFRS 15 and considered whether any changes were
needed to take account of COVID.
The Committee reviewed the ‘headroom’ to ensure that the value
in use supported the carrying value of the net assets with particular
regard to the actual and potential impact of COVID and satisfied itself
that no impairment was required.
The Committee reviewed the Group’s accounting for acquisitions and
satisfied itself that it was appropriate.
The Committee considered the review of eServe and the impairment
review and satisfied itself that carrying value was completely impaired.
The Committee considered the assumptions behind each of these
judgements and satisfied itself that they were appropriate, and were
indeed, exceptional in nature.
The Committee considered the impact of COVID on the financial
sustainability and operational resilience of the business, taking into
account the additional stress testing completed as part of the going
concern and viability assessments. It satisfied itself that the business is
well placed to face the ongoing challenges of the crisis.
The Committee considered the potential impact of the UK leaving the
EU and the ongoing implementation delay and concluded that the
impact on the underlying performance of the Group will be limited.
Board statements
Critical judgements and key sources of estimation uncertainty
The Group has identified critical accounting judgements in relation to business ownership interests. Key sources of
estimation uncertainty arise in relation to claims handling obligations in respect of revenue deferrals, pension valuation and
the impairment of goodwill and acquisition intangibles. Other areas of focus include the valuation of acquisition intangible
assets, the valuation of put options over non-controlling interests and policy cancellations.
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Continued
The Committee discussed how these matters impacted on the financial statements with the auditor and reviewed the
sensitivities considered by management.
Critical accounting judgements and key sources of estimation are set out on pages 150 to 151.
Going concern
The Committee reviewed whether it was appropriate to adopt the going concern basis for the preparation of the Annual
Report and considered a report from management. Consideration was given to the Group’s three year forecasts, availability
of committed bank facilities, expected headroom under the financial covenants and the impact of the COVID pandemic. The
Committee ensured that the assumptions underpinning the forecasts were stress tested and that the factors which impact on
risks and uncertainties were properly considered. Additional stress tests had been completed to take account of COVID.
Following the Committee’s review, it recommended to the Board that it was appropriate to adopt the going concern basis.
The going concern statement is set out on page 55.
Viability statement
The Committee reviewed a report from management setting out the basis for the conclusions in the viability statement. The
approach to the viability statement and the statement itself are set out on pages 54 to 55.
Fair, balanced and understandable
The Committee considered whether:
•
•
•
the Annual Report was clear and presented a balanced view of successes, challenges, opportunities and risks
key messages were prominent and appropriate KPIs were disclosed
reporting in respect of business segments, significant issues and key judgements were consistent with disclosures in
the financial statements
• definitions provided were explained and Alternative Performance Measures (APMs) were reconciled with the closest
IFRS measure in the financial statements
• adjusted profitability definitions were clearly explained and presented.
The Committee also noted that:
•
key contributors to sections of the Annual Report (such as Executive Directors and local CEOs) had been asked to
confirm the accuracy of the information provided
• an internal verification exercise had been completed in respect of the information contained in the Annual Report
• external support had been provided by FutureValue, a corporate reporting consultancy and Korn Ferry, who reviewed
the Directors’ Remuneration Report
• drafts of the Annual Report had been circulated to Committee Chairs and the full Board for review.
Having reviewed the Annual Report, the Committee and subsequently, the Board were satisfied that taken as a whole, the
Annual Report was fair, balanced and understandable and provided the necessary information for shareholders.
Robust assessment of emerging and principal risks
The Committee completed a robust assessment of the emerging and principal risks by reviewing the Group Enterprise
Risks and the top ten risks in respect of each business. Particular attention was paid to any risk that was out of appetite and
consideration was given to the mitigating actions being taken.
Risk management and internal control
The Board has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness. The Audit
& Risk Committee supports the Board by advising on the Group’s overall risk appetite, tolerance and strategy, current risk
exposures and future risk strategy. The Committee reviews risk registers produced by the management of each business and
the plc function along with the Group Enterprise Risks at each of its meetings. On a periodic basis, we also review action
plans in respect of significant risks.
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The Committee also monitors, on behalf of the Board, the effectiveness of the Company’s material accounting and internal
control systems. In fulfilling this responsibility for FY21, the Committee considered reports from management and the internal
and external auditors.
The Committee considers that appropriate controls are in place across the Group, that the Group has a well defined
organisational structure with clear lines of responsibility and a comprehensive financial reporting system. The Committee
also considers that the Group complies with the FRC guidance on risk management, internal control and related financial
reporting.
Further details in respect of risk management and internal controls are set out on pages 81 to 83.
Details in respect of the principal risks and uncertainties are set out on pages 32 to 37.
Regulation and compliance
The Group operates in a regulated market place and faces the challenges of regulatory requirements across its different
territories. This creates risk for the business as non-compliance can lead to customer detriment, reputational damage,
financial penalties and potential loss of licence to operate.
The Committee receives regular updates on legal and compliance from management and believes that key compliance
indicators are strong across the Group. All Membership businesses are required to complete Annual Compliance Reports
to confirm that the requirements of the Group Compliance Framework have been met and that processes and controls are
sufficient to identify breaches in local law and regulations.
External auditor
Effectiveness
The Committee is responsible for assessing the effectiveness of the external audit process, for monitoring the independence
and objectivity of the external auditor and for making recommendations to the Board in relation to the appointment of the
external auditor. The Committee is also responsible for developing and implementing the Group’s policy on the provision of
non-audit services by the external auditor.
Deloitte LLP has been the Group’s auditor since 2002 and the lead audit partner rotates every five years. The current lead
audit partner, Peter Birch was first appointed for FY20. The Committee sought and was provided with, assurance that all
members of Deloitte’s team had confirmed that they and their dependants were independent and that Deloitte, as a firm, was
independent.
Prior to each audit or review, Deloitte presented their plan to the Committee for discussion. The Committee reviewed
the reports prepared by Deloitte on key audit findings and any significant deficiencies in the control environment, as well
as the recommendations made to improve processes and controls together with management’s responses to those
recommendations. Deloitte did not highlight any material internal control weaknesses in respect of the FY21 audit.
The Committee also discussed with Deloitte the results of the FRC’s firm-wide review of Deloitte’s audit quality and the
proposed improvement plans arising from the report. The Committee noted that no firm inspected achieved the quality
targets set by the FRC and will monitor progress against the improvement plans.
The Committee reviews the performance of the external auditor annually based on their understanding of the Group, their
approach to key areas of judgement and the extent of challenge, the quality of reporting and the efficiency and conduct of
the audit. Feedback is also sought from Group finance and local finance directors on the external auditor’s performance. We
also reviewed the external auditor’s transparency report, which is intended to demonstrate the steps it takes to ensure audit
quality with reference to the Audit Quality Framework issued by the Professional Oversight Board of the FRC. In addition, I
meet with the external auditor outside of formal Committee meetings to ensure that there is an ongoing dialogue.
The Committee is satisfied that the audit continues to be effective and that Deloitte LLP continues to provide constructive
and independent challenge to management and consistently demonstrates a realistic and commercial view of the business.
On this basis, the Committee concluded that the needs of the Group would not be best served by putting the external audit
out to tender at this time. The Committee has therefore recommended to the Board that the re-appointment of Deloitte LLP
should be proposed at the forthcoming Annual General Meeting.
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Continued
The Committee has noted the changes to EU audit legislation and the UK adoption of this legislation, which requires
mandatory rotation for auditors of public interest entities at least every 20 years with a mandatory tender process being
undertaken at the 10 year point. The transitional rules for this new legislation mean that the Group would be required to
change its auditor after FY24. The Committee is mindful of the restrictions which now apply to firms providing non-audit
services in the two year period prior to an audit appointment. We will closely monitor the implications of the BEIS White
Paper with regards to restoring trust in audit and corporate governance and specifically, the likely implementation date
thereof, and the Committee may review the timing of the tender as a result.
The Company confirms that it has complied with the provisions of the CMA’s Statutory Audit Services Order for the financial
year under review.
In accordance with International Standards on Auditing (UK & Ireland) 260 and Ethical Statement 1 issued by the Accounting
Practices Board, and as a matter of best practice, the external auditor has confirmed its independence as auditor of the
Company.
Non-audit services
The Committee has approved a policy in respect of non-audit services which reflects the Ethical Standards. The policy sets
out a list of prohibited services and in particular, prevents Deloitte LLP from providing almost all taxation services. The policy
provides that the total fees payable to the auditor for non-audit related work in any financial year should not normally be
more than 50% of the total fees payable in respect of audit and compliance services. In addition, any proposed spend over a
predetermined limit must be approved by the Committee.
The fees payable to the auditor in respect of audit and audit-related assurance services totalled £1.4m and there were no fees
incurred for non-audit related work (excluding audit-related assurance services). Further detail on the fees paid is provided in
Note 5.
Internal audit
The Committee reviews and approves the internal audit plan which is based on an assessment of the risks faced by the
Group. The internal audit team undertakes an initial review of the risks and drafts a plan which addresses those risks while
taking into account the need to review key control processes on a cyclical basis. The draft plan is then discussed with senior
management in each business or territory before being presented to the Committee.
Progress in respect of the plan is monitored throughout the year and considered at each meeting of the Committee.
Consideration is also given at each meeting as to whether there is sufficient resource to deliver the plan and whether the
external resource available through the co-sourced arrangements needs to be adjusted. The audit plan may be reviewed
during the year as a result of the ongoing assessment of the key risks or in response to the needs of the Group.
The Assurance & Risk Director reports ultimately to the Chairman of the Committee although he reports on a day-to-
day basis to the Chief Financial Officer. He attends all meetings of the Committee and reports regularly to the Executive
Committee. A report on completed internal audits is presented to each meeting of the Committee and, where appropriate,
action plans are reviewed. In addition, all grade 1 audit reports are circulated to the Committee as soon as they are finalised so
that any issues can be addressed in a timely manner. Reports are graded as 1 if the controls currently operated are inadequate
and expose the business to significant loss or regulatory breach.
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Audit & Risk Committee report
91
During the year, the Committee received 74 reports in respect of the following areas:
Finance
Operations
IT controls
Key financial controls and processes including balance sheet control reviews, purchase to pay, order
to cash and record to report cycles.
Key operations processes including fulfilment, contractor management, business continuity
planning and disaster recovery, compliance and risk management.
Key IT controls including disaster recovery, mobile device management and general controls such
as logical access, back up and restore processes and controls.
Information Security Developments in information and cyber security including penetration testing, firewalls, server
security and crisis management.
In relation to each of the above, internal audit made recommendations for improvements, the vast majority of which have
been, or are being implemented by management. Management’s approach to internal audit is positive and there is a real
desire to work collaboratively to continually improve the control environment. Action trackers are reported on at each
Committee meeting.
The internal audit function continues to benefit from co-sourced arrangements with PwC and KPMG which are used
to augment the internal skills and experience available and ensure that the Group can access appropriate technical and
specialised resource on a global and flexible basis.
The Committee has discussed the performance of internal audit and believes that internal audit performs in a very
professional manner, provides constructive challenge and demonstrates a realistic and commercial view of the business.
Conclusion and looking ahead
The Committee considers that it has acted in accordance with its terms of reference and that it has ensured the
independence, objectivity and effectiveness of the external and internal auditors.
Going forward, I shall ensure that the Committee continues to acknowledge and embrace its role of protecting the interests
of shareholders as regards the integrity of the published financial information and the effectiveness of audit. The outcome
of the consultation on the government’s proposals to restore trust in audit and corporate governance has recently been
published and the Committee will monitor the progress of the proposals over the coming months and years.
I am available to speak with shareholders at any time. I would like to thank my colleagues on the Committee for their help and
support during the year.
Ron McMillan
Chairman of the Audit & Risk Committee
18 May 2021
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 92 Governance
Directors’ remuneration report
Remuneration at a glance
Single Total Remuneration Figure (£000)
Richard Harpin
David Bower
Tom Rusin
0
500
985
1,000
£000's
1,270
1,610
1,500
2,000
Key
Salary
Benefits
Pension
Annual Bonus
LTIP
Annual Bonus Outcome
Financial measures Adjusted Group profit
Non financial
measures
before tax
Customer growth
Trades growth
(Checkatrade)
No. of leads (Habitissimo)
Customer dissatisfaction
(measured as a weighted
average level of customer
dissatisfaction across the
UK, US, France and Spain)
Weighting
Maximum
Actual
% Payable
40%
15%
5%
5%
£184.0m
£191.3m
100%
8,163k
8,366k
100%
43.0k
43.6k
100%
2.1m
2.0m
94%
FY21
79.7% 1
payout
15%
5.6%
5.5%
100%
Personal targets
20%
100%
1 Payout reduced to 79.7%. See page 93
LTIP Outcome
Adjusted earnings per share
(75% weighting)
Relative TSR
(25% weighting)
20%
15%
10%
0%
15%
6%
9%
8.3%
Threshold
Stretch
HomeServe
100%
50%
0%
13.45%
Threshold
65.54%
52.58%
Stretch
HomeServe
20.33%
vesting
HomeServe plc Annual Report & Accounts 2021
Annual statement
KATRINA CLIFFE
Governance
Directors’ remuneration report
93
“It has been a challenging year for
many remuneration committees
given the uncertainties created by the
pandemic. We have been fortunate in
that HomeServe adapted promptly and
successfully to a new way of working
and we have been able to retain and
support our workforce and maintain
remuneration arrangements broadly
unchanged across the business.”
I am pleased to present the Remuneration report for the year ended 31 March 2021.
It has been a challenging year for many remuneration committees given the uncertainties created by the pandemic. We have
been fortunate in that HomeServe adapted promptly and successfully to a new way of working, with employees across the
business demonstrating tremendous resilience, despite considerable challenges.
We have been able to retain and support our workforce and maintain remuneration arrangements broadly unchanged
across the business. As we come out of the worst of the pandemic the Committee continues to focus on ensuring that those
arrangements are consistent with our company purpose and strategy with the aim of delivering reward that clearly links to the
delivery of our long-term plans.
FY21 in review
We delivered good financial results in respect of FY21 with 6% growth in adjusted profit before tax. There was also good
performance in respect of our non-financial measures which, combined with excellent personal performance, resulted in
a bonus outturn for the Executive Directors at 99.7% of the maximum available. However, following the decision to halt the
implementation of eServe, the UK CRM solution, which resulted in an exceptional charge of £84.8m, the Committee agreed
that it would be appropriate to exercise discretion to reduce the bonus for the Executive Directors. The payment in respect of
the profit element of their bonus has been halved and, as a result, the Executive Directors will receive a bonus at 79.7% of the
maximum.
In respect of longer-term performance, the LTIP awards granted in 2018 will only partially vest in July 2021. The awards were
based 25% on relative total shareholder return (TSR) performance and 75% on adjusted earnings per share (EPS) performance.
HomeServe’s TSR performance to 31 March 2021 was excellent, at 53% (compared to the FTSE 250 Index TSR of 13%) which
resulted in 81% vesting for the TSR element. Despite rising earnings over the three-year performance period, the rate of
growth of 8.3% per annum fell short of the minimum 9% per annum threshold required for this portion of the award to start
to vest. Accordingly, the overall level of vesting of the entire award was 20.33%. While we were disappointed to fall short of
the stretching EPS performance threshold, which has resulted in lower LTIP payments compared to prior years, we believe
that this demonstrates the highly performance orientated structure of our LTIP and is evidence of the remuneration policy
operating as intended. The vested shares, net of tax, are subject to a two year post-vesting holding requirement.
As noted in last year’s report, we took the decision to delay setting the performance conditions for the FY21 LTIP grant
in order to assess trading in the early months of the financial year and how this would impact on the three-year plan.
Historically, we have used a combination of EPS growth and relative TSR performance in respect of both the Performance
and Matching Share elements of the LTIP but a number of investors had suggested that we review this approach. Having
considered the feedback received, we decided that we would apply an EPS condition to the Performance Share element of
the LTIP and a relative TSR condition to the Matching Share element, thus clearly differentiating the separate parts of the plan
and providing a better balance by increasing the proportion of long-term incentives subject to TSR performance.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 94 Governance
Directors’ remuneration report
Annual statement
Continued
Having carefully considered our future growth trajectory and considered a number of scenarios in relation to how the
pandemic could impact the Group, the Committee agreed that it would be appropriate to set the threshold for the FY21
grant for compound annual EPS growth at 7%, with the top of the range at 13%. Although this was a slight reduction on the
EPS range in place for LTIP awards granted in prior years, the Committee took the view that the targets were appropriately
challenging given the changes to the external business environment and recognised that this range was still very stretching
by market standards. In respect of TSR, the Company’s performance will be compared to the performance of FTSE
companies ranked 31-200. The exact performance targets were announced to the market in July 2020 at the time the
awards were granted, and the full details are set out on page 118.
We welcomed a new Executive Director to the Board at the end of the year, Ross Clemmow. Ross joined us on 22 March
2021 as CEO, EMEA. Details of his remuneration arrangements are set out on page 113. As part of Ross’s recruitment package,
we agreed a buyout award to compensate him for incentives forfeited when he left his previous employer. All elements of
Ross’s pay, including the buyout award, are consistent with the terms of the remuneration policy approved by shareholders at
last year’s AGM.
FY22 – looking forward
The Committee has reviewed the salaries of the Executive Directors to apply with effect from 1 July 2021 and has agreed
increases for Richard Harpin and Tom Rusin of 2% and 2.5% respectively, in line with the average level of increase for other
employees in their home country. Ross Clemmow will not receive an increase as he has only recently been appointed.
For David Bower, the CFO, the Committee has agreed an increase in salary from £375,000 to £450,000. David was appointed
to his current role in 2017 on a salary of £300,000, well below that of his predecessor and in the bottom quartile when
measured against the salaries of CFOs of comparably-sized companies. This positioning reflected the fact that although he
had demonstrated a strong level of performance during his time with HomeServe, having joined the business in 2005, the
CFO role was his first plc Board position. The Committee wished to ensure he was the right person for the role and progress
his salary over time on the basis of performance and experience. A step change in David’s salary was made in 2018 to reflect
the expansion of his responsibilities following the removal of the Board-level COO role and his performance and growth
since initial appointment as CFO. He has received no further salary increases since then.
David has continued to perform at a very strong level and is an integral part of HomeServe’s senior leadership team and
central to the future growth strategy of the business. The Committee is aware that his current salary remains very significantly
below market and is making the increase to move it to a position which accurately reflects David’s performance, contribution
and commitment to the business.
The other key consideration has been the growth in size and complexity of HomeServe and in particular the growing
importance of the US part of the business. The Committee believes that David is vital to the continued expansion in the US.
He was pivotal in raising finance in the US during FY21 and understands the US business intimately.
The final reference point is the growth of the wider executive team in recent years. This includes Ross Clemmow, noted
above, and several below Board business unit and country heads who have been recruited on mid-market salaries. This has
created a situation where David’s salary is now out of kilter internally, something we are keen to fix.
The new salary of £450,000 is in line with what would be expected for a company at the top end of the FTSE 250 and is
considered to be the absolute minimum we would need to offer if we were in the position of having to recruit a replacement
of David’s calibre.
We intend the bonus scheme for FY22 to operate in a similar way as for FY21, using broadly similar performance measures
and weightings.
The FY22 grant of long-term incentives is intended to be made in June 2021. Executive Directors will again be offered the
opportunity to participate in the Matching Share element of the LTIP, subject to the investment of their FY21 cash bonus into
shares. Matching Shares will vest after three years subject to the same relative TSR performance conditions as applied for the
FY21 grant noted above.
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ remuneration report
95
An award of Performance Shares will also be made. With this award, we wish to incentivise truly exceptional levels of
performance from the Executive Directors as HomeServe continues to focus on growth. The Board has ambitious plans for
the business for the next three years and we would like to ensure that if our current growth expectations are exceeded, then
an appropriate level of reward is available.
As a result, we are increasing the size of the Performance Share award from 150% to 200% of basic salary. This higher award
level is in line with the 200% limit set out in the Directors’ remuneration policy, although we have chosen to grant at the lower
150% level in recent years. The last time this provision to grant at 200% was used was in 2015, following which there was the
strongest period of growth in the Company’s history. We believe that the higher award provided crucial additional focus to
the executives at that time and we now wish to drive further outperformance through a higher award this year.
To reflect the higher potential reward, we are making a corresponding increase to the EPS targets. In practice, this will mean
that the extra 50% of salary will only vest for the achievement of EPS growth over the performance period higher than that
which would be required for full vesting under an award at 150% of salary. For vesting of the element of the award equivalent
to 150% of salary, EPS growth of 7%-13% CAGR will be required, the same as applied to the FY21 Performance Share award
discussed above. Vesting of the element above 150% up to 200% of salary will require EPS growth of 13%-16% CAGR, thus
ensuring that there is a benefit to participants only in the event of EPS performance materially in excess both of our internal
forecasts for the coming three years and of current market estimates. This level of EPS growth required for an LTIP award is
amongst the highest in the market.
Any Matching Shares and Performance Shares which vest will continue to be subject to a two-year post-vesting holding
period, thus ensuring a five-year period between grant and ultimate release.
I recently wrote to major shareholders explaining our proposed approach both for the higher Performance Share award and
the increase to David Bower’s salary as discussed above.
Currently, the CEO and CFO benefit from employer pension contributions that are higher than those of the UK workforce.
The Committee has agreed that pension contributions for these Directors will be reduced to the level of the workforce at the
end of December 2022.
We have also agreed that we will review our remuneration policy during FY22 and, if we feel changes should be made, we
may present an updated policy for shareholder approval at the AGM in 2022. If we go down this route we will of course
discuss our proposals with major shareholders before finalisation. I look forward to these discussions and hearing the view of
shareholders on how we can continue to retain and incentivise our Executives to deliver outstanding performance.
During FY22 the Committee will also again review workforce remuneration and related policies to ensure that there
continues to be consistency and alignment with the approach taken for Executive Directors. The Committee is kept informed
of pay practices across the Group and spends a considerable amount of time reviewing incentive structures and other
matters for below-Board executives and employees more broadly. We are committed to ensuring that HomeServe operates
remuneration practices at all levels that are fair and appropriate.
During FY21 we reviewed the HomeServe One Plan, a plan in which all eligible employees can participate, and decided to
double the matching element so that participants now receive one free matching share for every partnership share that they
buy. This is consistent with our approach of encouraging high levels of share ownership across the business. In addition, I
engaged with the International People Forum during the year and there was a useful discussion about executive pay and the
reasons why it can differ from workforce arrangements. I look forward to similar engagement during FY22 as we continue to
focus on this important area.
The Committee’s activities during the year are described in more detail later in this report.
Katrina Cliffe
Chairman of the Remuneration Committee
18 May 2021
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 96 Governance
Directors’ remuneration report
Annual statement
Continued
UK Corporate Governance Code
As indicated in the compliance statement on page 60, the Board believes that HomeServe has applied the principles of the
UK Corporate Governance Code (‘the Code’) and complied with the relevant provisions of the Code during FY21, with a
couple of minor exceptions. As noted on pages 93 to 95, the Committee will align the pension contribution rate for the CEO
and the CFO to that of the wider workforce at the end of December 2022.
The Committee has considered the principles set out in Provision 40 of the Code and explains below how these have been
addressed:
• Clarity: The current Directors’ remuneration policy is set out on pages 97 to 104. Committee decisions around the
implementation of the policy are set out in each year’s Directors’ remuneration report. When consulting with major
shareholders on executive remuneration, or engaging with the workforce on such matters, the Committee aims for full
transparency surrounding its proposals and the rationale for making any changes. As an example, this approach was
taken during the consultation exercise with major shareholders conducted ahead of the renewal of the remuneration
policy in 2020 and the recent engagement with shareholders on the Committee’s proposals for FY22.
• Simplicity: The Committee is keen to ensure that the remuneration structures in place for Executive Directors (and
for other senior leaders within the business) are not overly complex and can be easily understood both internally and
externally. While the inclusion of the Matching Share scheme for the Directors means that they effectively participate in
three incentive arrangements, the scheme is an integral part of HomeServe’s philosophy of ensuring a focus on long-
term, equity-based remuneration. It has operated successfully for many years and its structure is well understood by
participants.
• Risk: The Committee is satisfied that the Directors’ remuneration policy is proportionate and does not lead to excessive
risks, either in terms of the behaviour it promotes or the potential for the generation of outsize rewards which are not tied
to performance. The policy has a strong performance focus, with the Committee seeking to ensure that incentive targets
are challenging but realistic and do not encourage undue risk-taking. The Committee regularly considers formal risk
reviews of the remuneration policy.
• Predictability: A range of possible values of rewards to individual Executive Directors under the current Directors’
remuneration policy was included in last year’s Annual Report & Accounts. An updated range is included in this year’s
report on page 102. While the final value of Directors’ remuneration will depend upon a variety of factors, including the
extent to which performance targets are met and HomeServe’s share price, these “scenario charts” provide indicative
values of reward for different performance outcomes.
• Proportionality: Incentives for Directors are based on the achievement of pre-set performance targets linked to
HomeServe’s strategic priorities and business plan, with both a financial and non-financial focus. Bonus payouts and
the vesting of Performance and Matching Share awards depend on genuinely challenging targets being met, with no
possibility of rewards for poor performance.
• Alignment to culture: HomeServe is an organisation focused on driving long-term shareholder value, and this is
recognised at Executive Director level by a remuneration policy which is heavily weighted towards performance and
payment in equity. Executive Directors are encouraged to invest their cash bonuses into shares and gain the potential
benefit of Matching Shares, subject to three-year performance targets being met. Further, the business prides itself on a
culture of excellent customer service, which is reflected in the use of performance metrics for the annual bonus scheme.
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ remuneration report
97
Directors’ remuneration policy
The Directors’ remuneration policy was approved by shareholders at the 2020 AGM.
The Committee’s policy for the remuneration of Executive Directors and other senior Executives is based on the following
principles:
•
to clearly align rewards with the Group’s financial and operational performance
•
to ensure that remuneration, in particular, variable pay, supports the Group’s strategy and purpose
•
to promote high levels of executive share ownership to encourage a long-term focus and alignment of interest between
executives and shareholders
•
to attract, retain and motivate high calibre executives.
To that end, the Committee structures executive remuneration in two distinct parts: fixed remuneration of basic salary,
pension and benefits and variable performance-related remuneration in the form of a cash bonus and long-term incentive
arrangements. Remuneration for Executive Directors is structured so that the variable pay element forms a significant portion
of each Director’s package.
The Committee is satisfied that neither the structure of the remuneration packages, with the high weighting on variable
pay, nor the performance measures targeted under the annual bonus and long-term incentive arrangements, encourages
inappropriate risk taking.
The remuneration arrangements are designed so as to provide a strong alignment of interest between the Executives and
shareholders and to support the growth and performance aspirations of the Company. The Committee is satisfied that the
current arrangements meet these objectives. Furthermore, there is a clawback provision in respect of annual bonuses and
long-term incentive awards which helps to guard further against excessive risk-taking.
Summary of components of Executive Directors’ remuneration
The table below summarises the Committee’s policy for the remuneration of Executive Directors.
Element
Purpose and link to strategy
Performance Period
Operation (including performance measures and maximum limits)
Basic salary
To reflect the
particular skills
and experience
of an individual
and to provide a
competitive base
salary compared
with similar roles in
similar companies.
Usually
reviewed
annually, with
any changes
normally taking
effect from
1 July each
year.
Individual pay is determined by the Committee taking into account
the role, responsibilities, performance and experience of the
individual and market data on comparable roles.
The Committee has not set a cap on the maximum salary level
that may be offered. However, any salary increases will normally
be no higher than the typical level of increase awarded to other
employees.
Increases above this level may be offered in certain circumstances
such as where an Executive Director has been promoted, has had
a change in responsibility, to reflect increased experience in the
role, or where there has been a significant change in the size and/
or scope of the business.
When reviewing salary increases, the Committee also takes into
account the impact of any increase to base salaries on the total
remuneration package.
Details of the current salaries of the Executive Directors are set out
in the Annual report on remuneration.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 98 Governance
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Directors’ remuneration policy
Continued
Element
Purpose and link to strategy
Performance Period
Operation (including performance measures and maximum limits)
Annual
(determined
after the year
end)
Annual bonuses are determined by reference to performance
against a mix of financial, non financial and personal objectives.
Before any bonus is payable a minimum level of financial
performance must be achieved.
Bonuses are based on Group performance. Individual
performance accounts for no more than 20% of the overall bonus
opportunity.
The maximum potential quantum is 100% of salary.
Bonuses are payable in cash but may be voluntarily invested by the
executive into shares under the matching element of the LTIP.
Three years
Awards of performance and matching shares are granted
under the Long Term Incentive Plan (which was approved by
shareholders in 2008 and renewed at the 2018 AGM).
Performance
related bonus
Long-term
incentives
The annual
bonus is designed
to drive and
reward the short-
term operating
performance of
the Company
and encourage
the delivery of
consistently
good customer
outcomes.
To drive long-term
delivery of the
Group’s objectives,
to align Directors’
interests with those
of the Company’s
shareholders and
to encourage
exceptional
performance.
The maximum limit is 200% of salary for performance share
awards and a maximum 2:1 match on voluntary investment of
bonus into shares.
The maximum amount of bonus that may be invested is set at 75%
of the maximum bonus potential (i.e. 75% of salary). If the bonus
earned is less than 25% of salary, then the executive may invest
the equivalent of 25% of salary, from their own money, in shares to
receive a matching award. In determining the number of matching
awards to be granted, the investment is deemed to be made gross
of tax.
Dividend equivalents may be awarded on shares vesting under the
Plan.
Performance awards and matching awards are subject to
challenging performance conditions. Performance is measured
over a performance period of at least three years and a two year
post vesting holding period applies.
Newly appointed UK based Executive Directors (including Ross
Clemmow) may receive a pension allowance that is aligned with
the majority of colleagues (currently 6% of salary in the UK), to be
paid, subject to the scheme limits, into the HomeServe Money
Plan (a money purchase pension scheme) and/or taken as a cash
allowance in lieu.
Of the other Executive Directors, Richard Harpin and David Bower
receive a pension allowance of 20% of salary, which may be taken
as a cash allowance in lieu. This benefit will reduce to the level of
the workforce no later than December 2022.
Other benefits include a fully expensed car (or cash alternative),
fuel allowance, private health cover (for the individual, partner and
dependant children), death in service benefits (up to 8 x salary) and
permanent health insurance.
Other benefits may be provided as appropriate and Directors can
access HomeServe products and services on the same terms as
offered to employees.
Any reasonable business related expenses (including tax thereon)
may be reimbursed if determined to be a taxable benefit.
There is no maximum limit on the value of the benefits provided
but the Committee monitors the total cost of the benefit provision.
Pension
To provide benefits
comparable with
similar roles in similar
companies.
n/a
Other
benefits
n/a
Provides a
competitive
package of benefits
to assist with
recruitment and
retention of staff.
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ remuneration report
99
Element
Purpose and link to strategy
Performance Period
Operation (including performance measures and maximum limits)
All Employee
Share Plans
To encourage
employee share
ownership.
Chairman
and Non-
Executive
Directors’
fees
To attract and retain
Non-Executive
Directors of the right
calibre.
n/a
n/a
The Executive Directors may participate in any employee share
plans offered by the Company on the same terms as other
employees.
Non-Executive Director fees are determined by the Board. The
fees for the Chairman are determined by the Remuneration
Committee taking into account the views of the Chief Executive.
The Chairman excludes himself from such discussions.
The fee levels are reviewed periodically and are set to reflect
the responsibilities and time commitment of the role and the
experience of the individual. Fee levels are set by reference to
rates in companies of comparable size and complexity. The
fees for the Non-Executive Directors comprise a basic Board
fee, with additional fees paid for chairing a Committee or for the
Senior Independent Directorship. The Chairman receives an all
encompassing fee for his role.
In exceptional circumstances, additional fees may be payable to
reflect a substantial increase in time commitment. Fees are paid
monthly in cash.
Any reasonable business related expenses (including tax thereon)
may be reimbursed if determined to be a taxable benefit.
The Chairman and Non-Executive Directors may be eligible to
access HomeServe products and services on the same terms as
offered to employees.
Performance measures
The Remuneration Committee works hard to ensure that the remuneration policy for the Executive Directors supports
the business strategy, and that the level of remuneration received is reflective of the overall business performance and
the returns received by shareholders. A significant proportion of the remuneration package comes from variable pay with
careful consideration given to the choice of performance metrics to ensure that the executives are not encouraged to take
inappropriate risks.
The choice of measures may change for future award cycles, but is currently based on the following:
Metric
Type of Award
Link to strategy
Profit Before Tax
Growth in Customers
and Trades
Bonus
Bonus
Customer Service
Bonus
Core short-term profitability metric.
Core non-financial top line volume metrics aligned with our growth
strategy.
Core non-financial quality metric that contributes to long-term customer
retention and reflects operational improvement.
Personal Strategic
Objectives
Earnings per Share
(EPS)
Total Shareholder
Return (TSR)
Bonus
Unique non-financial personal strategic objectives.
LTI
LTI
This provides an assessment of the profitability of the Group over the
longer-term and is strongly aligned to the execution of the business
strategy. Challenging targets are set for each award cycle based on
internal and external forecasts.
This measures the total return to shareholders provided through share
price appreciation and dividends.TSR provides a clear alignment between
the value created for shareholders and the reward earned by executives.
The Committee would consult with shareholders in advance of the introduction of new measures to be applied to future
award cycles.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 100 Governance
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Directors’ remuneration policy
Continued
Annual Bonus
The annual bonus is designed to drive and reward excellent short-term operating performance of the Company. No annual
bonus is paid unless a very high level of performance is achieved. The Committee reviews the annual bonus plan measures
annually in order to ensure that they are aligned with the Group’s strategy and so that bonus arrangements are consistent
amongst the senior executive team. Performance targets are set at the start of the financial year and are linked to the Group’s
strategic and operational objectives. The customer focused culture across our business is reflected in the use of non financial
metrics in the annual bonus scheme. These are balanced by the use of financial targets and personal objectives used to
reflect other strategic priorities.
The Committee retains the discretion to alter the choice and weighting of the metrics for future bonus cycles to reflect the
changing needs of the business. The payment of any bonus is at the discretion of the Committee and bonuses will only be
paid once a minimum level of financial performance is achieved.
LTIP
Long-term incentive awards will be granted in accordance with the rules of the shareholder approved HomeServe 2018
Long-Term Incentive Plan (LTIP) (and any subsequent replacement plan) and the discretions contained therein. The
performance measures for the matching and performance awards are set using a sliding scale of targets and no more than
25% of the award will vest for achieving the threshold performance hurdle.
Under the rules of the plan, the Committee has the discretion to adjust the targets applying to existing awards in exceptional
circumstances providing the new targets are no less challenging than originally envisaged. The Committee also has the
power to adjust the number of shares subject to an award in the event of a variation in the capital of the Company.
Awards under the LTIP may be granted as conditional allocations or nil (or nominal) cost options with, or as, forfeitable shares.
The Committee may also decide to grant cash based awards of an equivalent value to share based awards or to satisfy share
based awards in cash, although it does not currently intend to do so. Awards are satisfied through a mixture of either market
purchase or new issue shares. To the extent new issue shares are used, the LTIP will adhere to a 5% in 10 year dilution limit.
A post vesting holding period applies to all awards. There is a minimum period of five years from the date of grant of an award
before shares can be sold. To the extent that nil cost options are exercised after the three year vesting point, but before five
years, the net of tax value of the vested shares must continue to be held. The dividend roll up on unexercised nil cost options
will continue until five years from grant. This five year view provides a longer-term perspective to the incentive programme
than the three year performance period.
Clawback
The Committee has the power to reclaim some, or all, of a cash bonus and vested LTIP awards (performance and matching)
in exceptional circumstances, such as misstatement of financial results, an error in assessment of performance, the use of
misleading information and/or gross misconduct on the part of the individual.
Shareholding guidelines
It is the Board’s policy that Directors build up and retain a minimum shareholding in the Company. Each Director is
encouraged to hold shares of at least equal value to three times their annual basic salary or fee. For new Directors, the
requirement is expected to be met within five years of appointment (within five years of the adoption of the new policy for
existing Directors).
If the holding guideline has not been fulfilled at the point of exercise of any option or the vesting of any other long-term
incentive award, the Director must retain 50% of the net proceeds in the Company’s shares until the holding requirement is
achieved. Details of the current shareholdings of the Directors are provided on page 113.
The policy also reflects the post vesting shareholding requirement in respect of the Long-Term Incentive Plan whereby the
net of tax value of shares that vest must be retained for a period of two years.
The guideline for post-cessation shareholding requirements is 200% of base salary; this would apply for two years post
cessation and applies to shares awarded after the implementation of the policy.
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ remuneration report
101
How employees’ pay is taken into account
The remuneration policy for the Executive Directors is designed with regard to the policy for employees across the Group
as a whole. Our ability to meet our growth expectations and compete effectively is dependent on the skills, experience and
performance of all of our employees. Our employment policies, remuneration and benefit packages for employees are
regularly reviewed.
There are some differences in the structure of the remuneration policy for the Executive Directors and senior management
team compared to other employees reflecting their differing responsibilities, with the principal difference being the increased
emphasis on performance related pay for the more senior executives within the organisation. However, there are many
common themes. For example, the structure of the annual bonus, with the focus on financial, non financial and personal
performance is the same for employees at management grade and above with the same objectives being used for everyone
in a particular business unit.
Employee share ownership is encouraged and facilitated through extending participation in the LTIP to other senior leaders
within the business and all eligible employees are able to participate in the HomeServe One Plan, a share incentive plan.
The One Plan was reviewed during the year with the matching element doubled so that participants now receive one free
matching share for every partnership share that they buy.
Although the Committee does not consult directly with employees on Directors’ pay, the Committee does take into
consideration the pay and employment conditions of all employees when setting the policy for Directors’ remuneration. In
terms of comparison metrics, the Committee takes into account the average level of salary increase being budgeted for the
workforce when reviewing the salary levels of the Executive Directors. The Committee is also mindful of any changes to the
pay and benefit conditions for employees more generally when considering the policy for Directors’ pay.
The Chairman of the Committee took the opportunity to meet with the International People Forum during the year and
there was a useful discussion about executive pay and the reasons why it can differ from workforce arrangements.
How shareholders’ views are taken into account
The Committee considers shareholder feedback received regarding the Remuneration report annually and guidance from
shareholder representative bodies more generally. These views are key inputs when shaping remuneration policy. The
Committee consults with shareholders when considering changes to remuneration arrangements and did so in respect of
the renewal of the policy in 2020. More recently, the Committee sought shareholder feedback on the increase to the size of
the Performance Share award for FY22 and the basic salary increase for the CFO.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 102 Governance
Directors’ remuneration report
Directors’ remuneration policy
Continued
Remuneration scenarios for Executive Directors
The chart below details the composition of each Executive Director’s remuneration package and how it varies at different
levels of performance under the policy set out above. It demonstrates the balance between fixed and variable pay at
threshold, on-target and maximum performance levels under the normal remuneration policy for the Executive Directors.
£4,500
£4,000
£3,500
£3,000
£2,500
£2,000
£1,500
£4,491
£3,442
£3,369
£2,482
£2,582
51%
61%
£1,862
$4,949
$3,760
$2,673
63%
51%
61%
54%
£2,941
£2,241
£1,601
52%
62%
'
)
s
0
0
0
£
(
n
o
i
t
a
r
e
n
u
m
e
R
£1,000
£742
19%
17%
£500
£0
£557
19%
17%
20%
18%
$702
£441
20%
18%
100%
30%
22%
100%
30%
22%
100%
26%
19%
100%
28%
20%
Fixed
On Target
Maximum
Fixed
On Target
Maximum
Fixed
On Target
Maximum
Fixed
On Target
Maximum
R Harpin
D Bower
T Rusin 1
R Clemmow
Key
Fixed pay
Annual bonus
LTIP
LTIP value with 50% share price growth
1 Tom Rusin is paid in USD and the USD amounts have been converted to GBP for illustrative purposes.
Assumptions
Fixed:
On target:
Maximum:
Maximum plus share price growth: The maximum scenario above but illustrating the impact of a 50% increase in the share price on the LTIP awards.
Fixed pay only (salary plus benefits plus pension).
Target annual bonus of 80% of salary plus target LTIP awards in FY22 of 120% of salary plus matching awards of 90% of salary.
Maximum annual bonus of 100% of salary plus maximum LTIP awards in FY22 of 200% of salary plus matching awards of 150% of salary.
Salary levels (on which other elements of the packages are calculated) are based on salaries as at 1 July 2021.
The value of taxable benefits is based on the actual values paid in FY21.
Richard Harpin and David Bower receive a pension allowance of 20% of basic salary. The Executive Directors may participate in all-employee share schemes on the same basis as other
employees. The value that may be received under these schemes is subject to tax approved limits. For simplicity, the value that may be received from participating in these schemes has
been excluded from the above charts. The on target and maximum scenarios exclude the impact of share price growth except as otherwise noted.
HomeServe plc Annual Report & Accounts 2021
Governance
Directors’ remuneration report
103
Executive Directors’ service agreements and policy on payments for loss of office
Under the Executive Directors’ service contracts up to twelve months’ notice of termination of employment is required by
either party (reduced to six months if following a prolonged period of incapacity).
Dates of current contracts are summarised in the table below:
Name
D Bower
Date of contract
3 February 2017
R Clemmow
4 March 2021
R Harpin
T Rusin
18 January 2002
4 April 2018
Should notice be served, the Executives can continue to receive basic salary, benefits and pension for the duration of their
notice period. The Company may require the individual to continue to fulfil their current duties or may assign a period of
garden leave. The Company applies a general principle of mitigation in relation to termination payments and supports the
use of phased payments. From the date of the announcement of an Executive Director’s termination, any payment would be
capped at 12 months’ pay (that is, notice must be served concurrent with the announced departure).
Outplacement services may be provided where appropriate, and any statutory entitlements or sums to settle or compromise
claims in connection with a termination (including, at the discretion of the Committee, reimbursement for legal advice)
would be paid as necessary.
The service contracts also enable the Company to elect to make a payment in lieu of notice equivalent in value to twelve
months’ base salary, benefits and pension.
In the event of cessation of employment, the executives may still be eligible for a performance related bonus for the period
worked. Different performance measures may be set to reflect changes in the Director’s responsibilities until the point of
departure.
The rules of the LTIP set out what happens to outstanding share awards if a participant leaves employment before the end
of the vesting period. Generally, any outstanding share awards will lapse when an Executive leaves employment, except in
certain circumstances. If the Executive leaves employment as a result of death, ill-health, injury, disability, retirement, transfer
of employment or any other reason at the discretion of the Committee, then they will be treated as a ‘good leaver’ under the
plan rules.
For a good leaver, any outstanding unvested LTIP awards will vest on the normal vesting date subject to an assessment of
performance, with a pro-rata reduction to reflect the proportion of the vesting period served. The Committee may dis-apply
the time pro-rating requirement if it considers it appropriate to do so. In the case of cessation due to death, the Committee
can determine that the awards vest early. Outstanding vested but not exercised awards can be exercised by a good leaver
until the expiry of the normal exercise period (or within 12 months in the case of death).
In determining whether an Executive should be treated as a good leaver and the extent to which their award may vest, the
Committee will take into account the circumstances of an individual’s departure.
The treatment of share awards on a change of control is the same as that set out above in relation to a good leaver (albeit
with the vesting period automatically ending on the date of the change in control).
Recruitment Policy
Base salary levels will be set in accordance with HomeServe’s remuneration policy, taking account of the executive’s
skills, experience and their current remuneration package. Where it is appropriate to offer a lower salary initially, a series of
increases to the desired salary positioning may be given over subsequent years subject to individual performance. Benefits
will generally be provided in accordance with the approved policy, with relocation expenses and/or an expatriate allowance
paid for if necessary. For an overseas appointment (which may include the relocation of an existing Director), the benefit and
pension arrangements may be tailored to reflect local market practice (subject to the overall maximum limits on pension set
out in the policy table).
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 104 Governance
Directors’ remuneration report
Directors’ remuneration policy
Continued
The structure of the variable pay element will be in accordance with HomeServe’s policy as detailed above. The maximum
permitted variable pay opportunity is 450% of salary (100% of salary bonus + 200% of salary LTIP + 150% of salary matching
award). However, the normal award limits are a bonus of 100% of salary, a performance share award of 150% of salary and
up to a 150% of salary matching award. In the case of the matching awards, a new recruit may be invited to invest up to 25%
of salary from their own funds in the first year in order to receive a matching award (in determining the number of matching
awards to be granted, the investment is deemed to be made gross of tax). LTIP awards may be made shortly following an
appointment (assuming the Company is not in a closed period).
The performance and matching awards would be granted on a consistent basis to the other Executive Directors. In the case
of the annual bonus, different performance measures may be set for the first year, taking into account the responsibilities of
the individual and the point in the financial year at which they joined. If it is necessary to buy-out incentive pay (which would
be forfeited on leaving the previous employer) in order to secure the appointment, this would be provided for taking into
account the form (cash or shares), timing and expected value (i.e. likelihood of meeting any existing performance criteria)
of the remuneration being forfeited. The LTIP permits the grant of restricted share awards to Executive Directors in the case
of recruitment to facilitate this, although awards may also be granted outside of this scheme if necessary, and as permitted
under s.9.4.2.2 of the Listing Rules.
The service contract for a new appointment would be in accordance with the policy for the current Executive Directors.
In the case of an internal hire, any outstanding variable pay awarded in relation to the previous role will be allowed to pay out
according to its terms of grant.
Fees for a new Chairman or Non-Executive Director will be set in line with the approved policy.
Non-Executive Directors’ letters of appointment
Non-Executive Directors serve under letters of appointment for periods of three years. The Non-Executive Directors
(including the Chairman) have a notice period of three months but no liquidated damages are payable.
Fees are determined by the Executive Directors within the limits set by the Articles of Association, and are based on
information on fees paid in similar companies and the skills and the expected time commitment of the individual concerned.
Details of their current three year appointments are as follows:
Name
T Breen
K Cliffe
S David
R Donnelly
E Fitzmaurice
J M B Gibson
O Grémillon
R McMillan
Date of contract
27 January 2021
23 May 2020
23 November 2019
25 March 2021
23 May 2020
1 April 2019
29 March 2019
27 October 2020
Outside Appointments
Executive Directors may hold one outside appointment and can retain any fees received.
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ remuneration report
105
Annual report on remuneration
This part of the report has been prepared in accordance with Part 3 of the revised Schedule 8 set out in The Large and
Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, and 9.8.6R of the Listing
Rules. The annual report on remuneration will be put to an advisory shareholder vote at the 2021 Annual General Meeting.
Remuneration Committee Members
Katrina Cliffe (Chairman)
Tommy Breen (appointed 26 March 2021)
JM Barry Gibson (stepping down on 18 May 2021)
Stella David (stepped down on 17 July 2020)
Edward Fitzmaurice
Olivier Grémillon
Ron McMillan
All of the current members are independent Non-Executive Directors and the Chairman of the Committee has experience
of other remuneration committees. The Board determined that the Company Chairman, Barry Gibson, should remain a
member of the Committee taking account of the fact that he was considered to be independent on appointment and also
that, as a former Chairman of the Remuneration Committee, his knowledge of the development of the remuneration policy
and practices at HomeServe is invaluable. He takes no part in discussions relating to his own remuneration. Barry is stepping
down from the Board on 18 May 2021.
Responsibilities
The principal role of the Remuneration Committee is to set the framework and policy for remuneration of the Board of
Directors, both Executives and Non-Executives, and the Executive Committee. In determining these arrangements, the
Committee takes account of the employment conditions and remuneration arrangements across the Group, seeking to
ensure they align with common objectives and are based on the same principles. Insofar as possible, we ensure they also
follow similar structures, since this is the most reliable way of ensuring transparency. We aim to offer a remuneration package
that is sufficiently attractive to attract and appropriately reward the leadership team required to successfully run a complex
international Group.
The primary responsibilities of the Committee include:
• Determining the Group’s overall remuneration strategy
• Determining the remuneration packages of the Executive Directors and other members of the Executive Committee
• Selecting the measures and setting the performance criteria for the annual bonus and LTIP; and, at the end of the
performance periods, evaluating performance against these criteria and determining if discretion should be applied in
determining the final level of payment
• Approving the grant and exercise of executive share-based long-term incentive arrangements and overseeing the
operation of other share-based plans across the Group
• Agreeing the terms and conditions of service agreements with Executive Directors, including termination payments
• Monitoring the pay of the Executive Committee, whose pay takes into account that of the whole workforce; in this regard,
the Committee reviews internal relativities and pay ratios, and considers pay and conditions across the Group
• Considering the guidance issued by shareholders, their representative bodies and proxy agencies (including the
Investment Association and Institutional Shareholder Services) on matters related to executive compensation and
corporate governance; further, the Committee encourages an open dialogue with shareholders, soliciting feedback and
seeking their views ahead of enacting significant changes to the remuneration policy or its implementation.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 106 Governance
Directors’ remuneration report
Annual report on remuneration
Continued
The Committee’s terms of reference were reviewed during the year. The full schedule is available on our website:
www.homeserveplc.com/who-we-are/governance
In determining the remuneration policy, the Committee is free to obtain such professional advice as it sees fit, and it
periodically monitors both the policies of comparator companies and current market practice, in order to ensure that the
packages provided are sufficient to attract and retain Executive Directors of the necessary quality.
The Committee aims to develop and recommend remuneration strategies that drive performance and reward it
appropriately. In determining its policy, the Committee has paid regard to the principles and provisions of good governance
contained in the UK Corporate Governance Code and the guidelines issued by institutions such as the Investment
Association, ISS and the Pensions and Lifetime Savings Association (PLSA). The Committee operates under the delegated
authority of the Board.
The remuneration of Non-Executive Directors is a matter for the Board. No Director is involved in determining his or her own
remuneration.
The Committee has agreed and implemented a procedure for reviewing and assessing its own effectiveness as part of the
annual effectiveness review of the Board.
Advisers
The Committee selects its own advisers. From April 2020 to October 2020, independent advice was received by the
Committee from the Executive Compensation practice of Aon plc. Aon also provided technical implementation and
accounting advice in relation to the administration of the Company’s share schemes. Aon is a member of the Remuneration
Consultants Group and is a signatory to its Code of Conduct. During the year, insurance broking services were also provided
to the Group by other subsidiaries of Aon plc, which the Committee considers in no way prejudiced Aon’s position as the
Committee’s independent advisers. Aon plc had no connection with any individual Director.
Fees charged by Aon for advice provided to the Committee for the year ended 31 March 2021 amounted to £21,550
(excluding VAT). Aon also provided additional remuneration advisory services to the Company during the year ended
31 March 2021 which fell outside of its support to the Remuneration Committee. These fees amounted to £19,950
(excluding VAT).
During the year, Aon plc decided to withdraw from the provision of remuneration advisory services and as a result, the
Committee undertook a selection process for new advisers. Korn Ferry were selected and provided advice from November
2020. Korn Ferry is a member of the Remuneration Consultants Group and is a signatory to its Code of Conduct. During the
year, diversity & inclusion advice was also provided to the Group by Korn Ferry. The Committee does not consider that this
prejudices Korn Ferry’s position as the Committee’s independent advisers. Korn Ferry had no connection with any individual
Director.
Fees charged by Korn Ferry for advice provided to the Committee for the year ended 31 March 2021 amounted to £81,800
(excluding VAT).
The Committee has also received assistance from Richard Harpin, Group Chief Executive, David Bower, Chief Financial
Officer, Kate Keyworth, Group People Director and Anna Maughan, Company Secretary, all of whom attended meetings
of the Committee as required. No Executive took part in discussions in respect of matters relating directly to their own
remuneration.
HomeServe plc Annual Report & Accounts 2021
Governance
Directors’ remuneration report
107
Remuneration for the year under review (Audited)
Executives
D Bower
R Clemmow 1
R Harpin
T Rusin 2
Non-Executives
T Breen 3
K Cliffe
S David
R Donnelly 4
E Fitzmaurice
O Grémillon
J M B Gibson
R McMillan
Total FY21
Total FY20
Year
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
Salary
and fees
£000
Taxable
benefits 5
£000
Pension 6
£000
Bonus
£000
LTIP 7
£000
Total
Fixed
£000
Total
Variable
£000
375
375
12
—
588
585
508
519
62
—
77
68
68
70
1
—
57
55
57
55
300
263
68
65
2,173
2,055
17
18
—
—
23
28
9
9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
49
55
75
75
—
—
118
117
8
9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
201
201
299
356
—
—
469
538
405
462
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,173
1,356
219
803
—
—
412
2,969
340
2,408
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
971
6,180
467
468
12
—
729
730
525
537
62
—
77
68
68
70
1
—
57
55
57
55
300
263
68
65
2,423
2,311
518
1,159
—
—
881
3,507
745
2,870
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,144
7,536
Total
£000
985
1,627
12
—
1,610
4,237
1,270
3,407
62
—
77
68
68
70
1
—
57
55
57
55
300
263
68
65
4,567
9,847
1 Ross Clemmow joined the Board on 22 March 2021.
2 Tom Rusin is paid in USD and the USD amounts have been converted into GBP for the purposes of this table using the average exchange rate for FY21.
3 Tommy Breen joined the Board on 27 January 2021.
4 Roisin Donnelly joined the Board on 25 March 2021.
5 Benefits comprise company car, fuel allowance and medical insurance.
6 Details of pension contributions can be found later in the report.
7 The figures for FY20 have been updated to reflect the actual share price on vesting for the 2017 award. The figures for FY21 are based on the average share price over the last three
months of the financial year as the awards have not yet vested. The value shown for each LTIP award includes an amount in respect of dividend equivalents.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 108 Governance
Directors’ remuneration report
Annual report on remuneration
Continued
Details of variable pay earned in the year (Audited)
Annual Bonus
For FY21, the annual bonus was based on the following stretching targets. The Committee agreed a minor adjustment to the
weightings for FY21 bonuses which were disclosed in last year’s report, introducing a new measure linked to the number of
leads in the Habitissimo business and balancing this with a slight reduction on the weighting for the customer dissatisfaction
measure:
Financial and non financial bonus targets
Financial
measures
Adjusted Group profit
before tax
Non financial
measures
Customer growth
Trades growth
(Checkatrade)
No. of leads (Habitissimo)
Customer dissatisfaction
(measured as a weighted
average level of customer
dissatisfaction across the
UK, US, France and Spain)
Weighting
% Payable at
Threshold
Threshold
Maximum
Actual
% Payable
40%
15%
5%
5%
25%
20%
40%
40%
£177.0m
£184.0m
£191.3m
100%
8,000k
8,163k
8,366k
100%
40.9k
1.85m
43.0k
2.1m
43.6k
2.0m
100%
94%
15%
20%
5.9%
5.6%
5.5%
100%
Personal bonus targets
Objectives
Weighting Outcome
D Bower
R Harpin
Use financial analysis
to drive business
improvements or
efficiencies that generate
incremental in year savings
versus the budget
Develop and prove
out two new Home
Experts initiatives,
creating opportunities for
significant P&L benefit in
FY22
T Rusin
To reinvent and step
change Membership &
HVAC growth
% Payable
100%
20% Key achievements included:
• Delivering significant cost savings (£6m+, including a
marked reduction in plc costs) and profit in excess of
targets for FY21
• Arranged additional US Private Placement funding to
support the delivery of our growth plans and increasing our
appeal to US investors
• Pioneered enhanced internal budgeting process.
20% Key achievements included:
100%
• Proved out UX for Directory Extra and developed highly
successful new advertising campaign for Checkatrade
which increased Checkatrade web visits from 23.6m to
29.0m
• Rollout of the freemium model
• Clearly identified FY22 P&L opportunities.
20% Key achievements included:
100%
• Delivering growth in HVAC growth in terms of revenue
(16% growth), policies (15% growth) and profit (65% growth),
doubling HVAC customers to over 100k
• Beginning the step change to driving new growth in the UK
• Decreased complaints per claim and increased service
efficiency in the UK
• Delivering continued strong customer growth in mainland
Europe, including 27% growth in HVAC customers in France
and 86% growth in gross new customers in Spain
• 7% customer growth in North America.
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ remuneration report
109
Despite the COVID pandemic the Group performed well, delivering good growth in adjusted PBTA and strong growth
in Membership customers, particularly in North America and France. Progress was also made in respect of the key
strategic measures in Home Experts; trades and leads. Continued focus on customer service across all of our businesses
meant that customer dissatisfaction remained low. Combined with the excellent personal performance of each of our
Executive Directors, this delivered bonuses at 99.7% of the maximum available. However, following the decision to halt the
implementation of eServe, the UK CRM solution, which resulted in an exceptional charge of £84.8m, the Committee agreed
to exercise discretion to reduce the bonus for the Executive Directors. The payment in respect of the profit element of their
bonus has been halved and, as a result, the Executive Directors will receive a bonus at 79.7% of the maximum.
The following bonuses were payable:
Name
D Bower
R Harpin
T Rusin
Bonus £
298,875
468,686
404,789
% of salary
79.7%
79.7%
79.7%
Annual bonuses are paid in cash but Executive Directors have the opportunity to invest their bonuses (up to 75% of the
maximum) in HomeServe shares in order to participate in the matching element of the LTIP.
Ross Clemmow was appointed on 22 March 2021 and did not participate in the FY21 bonus scheme.
Long-term Incentive Plan
The 2018 LTIP performance and matching awards were granted on 24 July 2018.
The performance conditions for the performance and matching awards were as follows:
Percentage of award to which
the condition applies
25%
Performance period
Threshold target
Stretch target
Actual performance
Vesting
3 years to
31 March 2021
TSR equal to the
FTSE 250 index
TSR exceeds
the index by an
average of 15% p.a.
52.58%
81.3%
Condition
TSR
(underpinned
by underlying
financial
performance)
EPS
75%
3 years to
31 March 2021
Compound
annual growth
of 9%
Compound annual
growth of 15%
8.3%
0%
Based on the level of performance as set out in the table above, the overall level of vesting was 20.33%. A two year post-
vesting holding requirement applies to the awards.
The 2018 awards have been valued for the purpose of the remuneration table on page 107 using the average share price over
the last three months of the financial year.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 110 Governance
Directors’ remuneration report
Annual report on remuneration
Continued
Summary of outstanding awards (Audited)
LTIP
Details of the maximum number of shares receivable from awards made under the LTIP are as follows:
31 March 2021
Awarded during year
Lapsed during year
Vested during year
31 March 2020
Date granted
Type of award
D Bower
R Harpin
T Rusin
—
46,247
45,117
47,468
40,789
42,485
41,985
—
—
87,133
84,691
74,438
71,453
66,623
65,842
—
—
74,699
67,192
65,926
62,030
59,666
59,475
—
—
—
—
—
42,485
41,985
—
—
—
—
—
—
66,623
65,842
—
—
—
—
—
—
59,666
59,475
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
59,250
—
—
—
—
—
—
111,632
107,547
—
—
—
—
—
—
93,920
83,823
—
—
—
—
—
—
59,250
46,247
45,117
47,468
40,789
—
—
111,632
107,547
87,133
84,691
74,438
71,453
—
—
93,920
83,823
74,699
67,192
65,926
62,030
—
—
27.6.17 Performance
24.7.18 Performance
24.7.18 Matching
26.6.19 Performance
26.6.19 Matching
15.7.20 Performance
15.7.20 Matching
27.6.17 Performance
27.6.17 Matching
24.7.18 Performance
24.7.18 Matching
26.6.19 Performance
26.6.19 Matching
15.7.20 Performance
15.7.20 Matching
27.6.17 Performance
27.6.17 Matching
24.7.18 Performance
24.7.18 Matching
26.6.19 Performance
26.6.19 Matching
15.7.20 Performance
15.7.20 Matching
The performance conditions for the outstanding awards granted in 2018 and 2019 are as follows:
• 25% comparative TSR (FTSE 250 Index + 15% per annum for maximum vesting)
• 75% compound annual EPS growth (15% CAGR for maximum vesting).
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ remuneration report
111
Further details on LTIP awards granted in the year
On 15 July 2020, the following performance and matching share awards were granted to the Executive Directors under the
LTIP:
Performance share awards
D Bower
R Harpin
T Rusin
Date of grant
Number of shares
Share price used to
determine awards
Award size
(% salary)
15.7.20
15.7.20
15.7.20
42,485
66,623
59,666
£13.24
£13.24
£13.24
150%
150%
150%
Face value at
grant £
£562,501
£882,089
£789,978
% that vests at
threshold
25%
25%
25%
Performance Share Awards will vest after three years subject to continued employment and the achievement of stretching
performance criteria relating to EPS. The extent to which Performance Share Awards vest at the end of the Performance
Period will be determined as follows:
Compound annual percentage growth in EPS
Percentage of Shares that Vests
Less than 7%
7%
Between 7% and 13%
13% or more
0%
25%
On a straight-line basis between 25% and 100%
100%
The Performance Period is the period of three financial years ending on 31 March 2023. Vesting is also subject to
underlying financial performance and a two year post vesting holding period applies.
Matching share awards
Number of
investment shares
purchased
11,126
17,448
15,761
Date of grant
15.7.20
15.7.20
15.7.20
Award size
2:1 match
2:1 match
2:1 match
Number of
shares subject to
matching award
Share price used to
determine awards
41,985
65,842
59,475
£13.24
£13.24
£13.24
Face value £
£147,308
£231,012
£208,676
% that vests at
threshold
25%
25%
25%
D Bower
R Harpin
T Rusin
Subject to the retention of the Investment Shares, continued employment and the achievement of stretching comparative
TSR related performance criteria, the Matching Share Awards will vest in three years’ time.
The Company’s TSR over the Performance Period must match or exceed the TSR of the Peer Group over the Performance
Period. The Peer Group is those companies at positions 31 to 200 in the FTSE Index at the start of the Performance Period.
The extent to which Matching Share Awards vest at the end of the Performance Period will be determined as follows:
The Company’s TSR over the Performance Period
Percentage of Shares that Vests
Below the TSR of the median company in the Peer Group
Equal to the TSR of the median company in the Peer Group
Equal to or more than the TSR of the company at the 75th
percentile of the Peer Group
0%
25%
100%
Between median and upper quartile TSR
Pro-rata on a straight-line basis between 25% and 100%
The Performance Period is the period of three financial years ending on 31 March 2023. Vesting is also subject to underlying
financial performance and a two year post vesting holding period applies.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 112 Governance
Directors’ remuneration report
Annual report on remuneration
Continued
Further details on awards vested in the year
Performance and matching awards granted on 27 June 2017 vested in full during the year.
Date of grant
Type of Award
Date of exercise
No of Shares
D Bower
R Harpin
27.6.17
Performance
27.6.17
Performance
27.6.17
Matching
T Rusin
27.6.17
Performance
27.6.17
Matching
30.6.20
30.6.20
30.6.20
30.6.20
30.6.20
59,250
111,632
107,547
93,920
83,823
One Plan Matching Shares (Share Incentive Plan)
Share price at
exercise
Face value
at exercise £
Dividend equivalents
paid in cash £
£12.97
£12.97
£12.97
£12.97
£12.97
£768,473
£1,447,867
£1,394,885
£1,218,142
£1,087,184
£34,069
£64,188
£61,840
£54,004
£48,198
D Bower
R Harpin
T Rusin
31 March 2021
Sold during the
year to pay tax on
vesting
Acquired during
year
31 March 2020
Aggregate face value
of shares awarded
during the year £ 1
465
465
421
—
—
39
83
83
89
382
382
371
£981
£981
£1,052
1 Based on the acquisition price of the associated Partnership Shares.The highest share price was £13.30 and the lowest share price was £10.22.
Until January 2021, participants received one Matching Share for every two Partnership Shares they purchase. From February
2021, the match was enhanced to one Matching Share for every one Partnership Share purchased. Shares are purchased on a
monthly basis. Matching Shares are normally kept in trust for a minimum period of three years.
Shareholding Guidelines (Audited)
It is the Board’s policy that Executive Directors build up and retain a minimum shareholding in the Company. Each Director is
encouraged to hold shares of at least equal value to 300% of their annual basic salary or fee.
Under the Long-Term Incentive Plan, the net of tax value of shares that vest must be retained for a period of two years.
The beneficial interests of Directors who served at the end of the year, together with those of their families, in the shares of
the Company are as follows:
D Bower
R Clemmow 2
R Harpin
T Rusin
T Breen 3
K Cliffe
S David
R Donnelly 4
E Fitzmaurice
O Grémillon
J M B Gibson
R McMillan
18 May 2021
167,364
—
31 March 2021
167,338
31 March 2020
124,648
Outstanding LTIP
awards
264,091
Total
31 March 2021
431,429
—
—
—
—
40,790,030
40,790,004
40,553,117
450,180
41,240,184
841,752
841,725
703,862
388,988
1,230,712
—
20,976
100,020
—
786,265
15,600
150,070
17,999
—
20,976
100,020
—
786,265
15,600
150,070
17,999
—
18,276
100,020
—
786,265
10,000
150,070
15,249
—
—
—
—
—
—
—
—
—
20,976
100,020
—
786,265
15,600
150,070
17,999
Value of shares
counting towards
guideline holding
(as a % of salary
or fee) ¹
536%
Guideline met?
Yes
—
83,305%
1,990%
—
283%
1,560%
—
14,528%
288%
601%
281%
No
Yes
Yes
No
No
Yes
No
Yes
No
Yes
No
¹ Calculated using the shareholding and share price on 31 March 2021 of £12.01 divided by the Executive’s salary or Non-Executive’s fee on that date.
2 Ross Clemmow was appointed on 22 March 2021.
3 Tommy Breen was appointed on 27 January 2021.
4 Roisin Donnelly was appointed on 25 March 2021.
HomeServe plc Annual Report & Accounts 2021
Governance
Directors’ remuneration report
113
2021
£000
75
—
118
2020
£000
75
—
117
Directors’ pensions (Audited)
The following contributions were made:
D Bower
R Clemmow
R Harpin
Tom Rusin participates in a US 401k pension plan (a defined contribution scheme) to which the Company contributed £8,639
($11,278) in FY21. (FY20: £8,915).
Ross Clemmow
Ross Clemmow joined the Board on 22 March 2021. His remuneration package comprises:
• Base salary of £400,000 per annum
• Maximum annual bonus of 100% of salary
• Annual LTIP Performance Share Award of 150% of salary and eligibility to participate in the Matching Share element of
the LTIP
• Car allowance of £14,000
• Pension contributions of 6% (in line with the rate for the wider workforce)
• Other benefits including medical insurance and life insurance.
In addition, a one-off award will be made to buy out Ross’s participation in a carried interest fund operated by his previous
employer which was forfeited on leaving. After taking external advice, the Committee agreed to buy out his interest in this
fund at a level of 50% of the minimum projected value of the fund, which was considered to be a fair estimate of what he was
effectively forfeiting on his departure. The value of the buyout was determined at £750,000. The Committee agreed to grant
this buyout award as an award of shares subject to the same performance and vesting conditions as those applying to the
LTIP Awards to be granted in 2021. As a result, the buyout award has a long-term structure and the award will only vest in the
event of challenging performance conditions being met over the forthcoming three-year period. The Committee intends to
grant the award under Listing Rule 9.4.2 (2), which permits share awards to be granted to Directors linked to their recruitment
without the requirement for specific shareholder approval to be sought. The use of Listing Rule 9.4.2 (2) in this fashion is
permitted by the remuneration policy.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021
114 Governance
Directors’ remuneration report
Annual report on remuneration
Continued
Performance graph
The graph below shows the Company’s performance, measured by TSR, compared with the performance of the FTSE-
250 Index (also measured by TSR) for the ten years ended 31 March 2021. This comparator has been chosen as it is a broad
equity index of which the Company is currently a constituent and it is also the one historically used in assessing relative TSR
performance under the LTIP.
300
250
200
150
100
50
0
31 March 11
31 March 12
31 March 13
31 March 14
31 March 15
31 March 16
31 March 17
31 March 18
31 March 19
31 March 20
31 March 21
The graph shows the value, by 31 March 2021, of £100 invested in HomeServe on 31 March 2011 compared with that of £100 invested in the FTSE-250 Index on the same date.
FTSE-250 index
HomeServe plc
Chief Executive’s remuneration
The total remuneration figures for the Chief Executive during each of the last ten years are shown in the table below. The
figures include the annual bonus based on that year’s performance and the matching awards plus the LTIP awards based on
the three year performance period ending in the relevant year. The annual bonus and long-term incentive award vesting level
as a percentage of the maximum opportunity are also disclosed below:
Total remuneration (£000s)
Annual Bonus
LTIP awards vesting
FY12
559
0%
60%
FY13
953
75%
0%
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
1,212
100%
0%
1,200
3,355
4,256
8,563 1
4,749 2
4,237
1,610
96%
0%
98%
100%
100%
100%
96%
75%
92%
79.7%
100%
100%
100% 20.33%
Notes:
1 The total includes the 2014 and 2015 LTIP awards which were granted and vested a year apart.
2 Standard LTIPs vested at 100%. Additional LTIPs vested at 96.38%.
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ remuneration report
115
Percentage change in remuneration levels
The table below shows the percentage change in each Director’s remuneration (excluding the value of any pension,
matching awards and performance awards receivable in the year) between FY20 and FY21 compared to the average for all
employees of HomeServe plc.
% Change from FY20 to FY21
D Bower
R Clemmow
R Harpin
T Rusin
T Breen
K Cliffe
S David
R Donnelly
E Fitzmaurice
O Grémillon
J M B Gibson
R McMillan
Average of other HomeServe plc employees
Salary
0%
n/a
1%
1%
n/a
13%
(3%)
n/a
5%
5%
14%
5%
5%
Benefits
(6%)
n/a
(19%)
(6%)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2%
Annual Bonus
(16%)
n/a
(13%)
(10%)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
34%
CEO pay ratio
The table below compares the Chief Executive’s total remuneration against that of all of its UK employees.
Year
FY21
FY20
Method
25th Percentile pay ratio
Median pay ratio
75th percentile pay ratio
Option B
Option B
70:1
203:1
52:1
126:1
43:1
91:1
In terms of reporting options, the Company chose option B, using the most recent gender pay gap information to
determine the relevant employee at the 25th, 50th and 75th percentile to compare to the Chief Executive’s pay, as that data
was considered to be the most accurate and comprehensive data available. It refers to gender pay data as at 1 April 2020
in respect of the FY21 disclosures and as at 1 April 2019 in respect of the FY20 disclosures. The pay and benefits for the
employees identified was determined as at 31 March 2021 for the FY21 disclosures and as at 31 March 2020 for the FY20
disclosures.
The total pay and benefits figures and the salary figures used for the pay ratio calculations are set out in the table below.
Year
FY21
FY20
Total pay and benefits
Salary
Total pay and benefits
Salary
25th Percentile pay ratio
£23,039
£22,645
£20,922
£18,815
Median pay ratio
£30,767
£24,058
£33,751
£28,074
75th percentile pay ration
£37,010
£34,091
£46,483
£31,328
There has been significant change since we published our first CEO pay ratio report in 2020. This is largely due to the much
lower level of LTIP vesting in respect of the CEO in 2021 compared to previous years.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 116 Governance
Directors’ remuneration report
Annual report on remuneration
Continued
The employees identified for this year’s report are all working in frontline Customer focussed roles at increasing levels of
seniority. With frontline roles representing a substantial proportion of the UK workforce, these employees are therefore
reasonably representative of the 25th, 50th and 75th percentiles and demonstrate the progression in remuneration across the
largest proportion of the workforce.
Overall the data demonstrates the commitment to pay the real Living Wage rate to all directly employed staff, which
underpins the UK pay structure and is reflective of the wider approach to pay and progression.
Relative importance of spend on pay
The following table shows the Company’s actual spend on pay (for all employees) relative to dividends, tax and retained
profits:
Pay
Dividends
Tax
Retained profits
FY20
£m
339.2
73.5
32.1
106.0
FY21
£m
389.1
80.5
15.4
31.1
% change
+15%
+10%
-52%
-71%
Application of the remuneration policy for FY21
Basic salary
Basic salary for each Executive Director is determined by the Remuneration Committee taking into account the roles,
responsibilities, performance and experience of the individual. Salary increases are determined taking into account pay and
employment conditions of employees elsewhere in the Company and market data on salary levels for similar positions at
comparably-sized companies.
Salaries are normally reviewed in July each year (unless responsibilities change). The explanation for the salary decisions for
FY22 is in the Annual Statement of the Chairman of the Remuneration Committee on pages 94 to 95.
The salaries for the Executive Directors from 1 July 2021 will be as follows:
Name of Director
D Bower
R Clemmow
R Harpin
T Rusin
Salary
£450,000
£400,000
£599,824
$679,575
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ remuneration report
117
Fees for the Chairman and Non-Executive Directors
As detailed in the remuneration policy, the Company aims to set remuneration for Non-Executive Directors at a level which
is sufficient to attract and retain Non-Executive Directors of the right calibre. The fees paid to the Chairman and the Non-
Executive Directors are reviewed periodically.
The fees for Non-Executive Directors were reviewed during FY21. Fees had been unchanged since 2015 and having reviewed
the market data and taking into account the growth in the size and complexity of the Group, it was agreed that fees be
increased to ensure that they remained competitive. Increases took effect on 1 January 2021.
As disclosed last year, the fees for the Chairman were reviewed in FY20 as part of the work undertaken in respect of the
search for a successor to Barry Gibson.
Details of the current and previous fees are detailed in the table below.
Chairman's fees 1
Senior Independent Director additional fee
Non-Executive Directors' base fee
Chair of Remuneration, Audit & Risk or People Committee
Previous
£300,000
£7,500
£55,000
£10,000
Current
£350,000
£12,000
£65,000
£12,000
1 The ‘previous’ figure for the Chairman relates to Barry Gibson who steps down on 18 May 2021. The ‘current’ figure relates to Tommy Breen who was appointed to the Board on 27
January 2021 and takes over as Chairman on 19 May 2021. The fee for the new Chairman reflects the increased size and complexity of the business compared to when Barry was
originally appointed as Chairman and takes account of fees paid at comparable businesses.
Annual bonus performance targets
The annual bonus plan for FY22 will operate on a similar basis to FY21 and is consistent with the policy detailed earlier in this
report.
The bonus measures will be as follows:
Financial measures
(40% of bonus)
• Profit before tax
Non financial measures
(40% of bonus)
• Customer growth (15%)
• Trades growth (Checkatrade) (5%)
• Trades growth (Habitissimo) (5%)
• Customer service (15%)
Personal objectives
(20% of bonus)
• Up to three personal strategic
objectives
The Committee considers the forward looking performance targets to be commercially sensitive but more detailed
disclosure will be provided in next year’s remuneration report.
The Committee has discretion to scale back any bonus payments if it is deemed appropriate.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 118 Governance
Directors’ remuneration report
Annual report on remuneration
Continued
Long-term incentives
The Long-Term Incentive Plan will continue to provide a mix of Performance (up to 200% of salary) and Matching Share
Awards (2:1 match on up to 75% of salary bonus invested in shares). As explained in the Annual Statement of the Chairman of
the Remuneration Committee on pages 94 to 95, the FY22 Performance Share award for Executive Directors will be at 200%
of salary.
Performance criteria
The performance targets to be applied to the awards granted in FY22 are set out below. The performance period is the three
financial years ending on 31 March 2024.
Compound annual percentage growth in EPS
Percentage of Shares that Vests
Less than 7%
7%
0%
18.75%
Between 7% and 13%
On a straight-line basis between 18.75% and 75%
13%
75%
Between 13% and 16%
On a straight-line basis between 75% and 100%
16%
100%
Matching Share Awards will vest after three years subject to the retention of the Investment Shares purchased with the annual
cash bonus, continued employment and the achievement of stretching comparative TSR related performance criteria. The
Company’s TSR over the performance period must match or exceed the TSR of the Peer Group over the performance
period. The Peer Group is those companies at positions 31 to 200 in the FTSE Index at the start of the performance period.
The extent to which Matching Share Awards vest at the end of the performance period will be determined as follows:
The Company’s TSR over the Performance Period
Percentage of Shares that Vests
Below the TSR of the median company in the Peer Group
Equal to the TSR of the median company in the Peer Group
Equal to or more than the TSR of the company at the 75th
percentile of the Peer Group
0%
25%
100%
Between median and upper quartile TSR
Pro-rata on a straight-line basis between 25% and 100%
Holding period for vested shares
The net of tax value of any shares vesting under the LTIP must be held for a further two years, providing a longer-term
perspective to the incentive programme.
Shareholder voting at the 2020 Annual General Meeting
At last year’s Annual General Meeting held on 17 July 2020, the following votes from shareholders were received:
Remuneration report
Remuneration policy
Total number of votes
% of votes cast Total number of votes
% of votes cast
For
Against
232,066,059
6,235,977
97.4%
226,075,370
2.6%
10,179,917
Total votes cast (for and against excluding withheld votes)
238,302,036
100.0%
236,255,287
Votes withheld
Total votes (including withheld votes)
5,760,270
244,062,306
3,713,421
239,968,708
95.7%
4.3%
100.0%
By Order of the Board
Katrina Cliffe
Chairman of the Remuneration Committee
18 May 2021
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ report
119
Directors’ report
The Directors have pleasure in presenting their Annual Report for the year ended 31 March 2021.
Management report
The Directors’ report, together with the Strategic report set out on pages 2 to 57 form the Management Report for the
purposes of Disclosure Guidance and Transparency Rule (DTR) 4.1.5R.
Statutory information contained elsewhere in the Annual Report
Information required to be part of this Directors’ Report can be found elsewhere in the Annual Report as indicated in the table
below and is incorporated into this report by reference.
Information
Location in Annual Report
Likely future developments in the business of the Company or its subsidiaries
Pages 2 to 55
Employees (employment of disabled persons, employee engagement and policies)
Pages 25 to 26
Greenhouse gas emissions
Employee engagement
Supplier, customers, others in a business relationship
Corporate Governance statement
Directors’ details (including changes made during the year)
Related party transactions
Diversity
Share capital
Going Concern and Viability statement
Employee share schemes (including long-term incentive schemes)
Financial instruments: Information on the Group’s financial instruments and risk
management objectives and policies, including our policy for hedging
Statements of responsibilities
Disclosure of information to auditor
Pages 30 to 31
Page 25
Pages 20 and 21
Pages 58 to 91
Pages 71, 72 and 74
Note 34 on page 187
Page 26
Note 28 on page 180
Pages 54 to 55
Note 32 on pages 182 to 184
Note 27 and 46 on pages 177
and 199
Pages 122 to 123
Page 122
Disclosure table pursuant to Listing Rule (LR) 9.8.4C
The following table provides reference to where the information required by Listing Rule 9.8.4C R is disclosed:
Listing Rule
Listing Rule requirement
Interest capitalised by the Group and any related tax relief
Unaudited financial information (LR 9.2.18 R)
Long-term incentive schemes (LR 9.4.3 R)
Directors’ waivers of emoluments
Directors’ waivers of future emoluments
Non pre-emptive issues of equity for cash
9.8.4(1)
9.8.4(2)
9.8.4(4)
9.8.4(5)
9.8.4(6)
9.8.4(7)
9.8.4(8)
9.8.4(9)
Disclosure
Not applicable
Strategic report page 2 to 55
Directors’ remuneration report
pages 109 to 112
Not applicable
Not applicable
Not applicable
Non pre-emptive issues for cash by any unlisted major subsidiary undertaking Not applicable
Parent company participation in a placing by a listed subsidiary
Not applicable
9.8.4(10)
Contract of significance in which a Director is or was materially interested
Not applicable
9.8.4(11)
Contract of significance between the Company (or one of its subsidiaries) and
a controlling shareholder
Not applicable
9.8.4(12)
Waiver of dividends by a shareholder
9.8.4(13)
Waiver of future dividends by a shareholder
Directors’ report on page 120
Directors’ report on page 120
9.8.4(14)
Board statement in respect of relationship agreement with the controlling
shareholder
Not applicable
GOVERNANCEHomeServe plc Annual Report & Accounts 2021
120 Governance
Directors’ report
Directors’ report
Continued
Results and Dividends
The Directors are recommending the payment on 2 August 2021 of a final dividend of 19.8p per ordinary share to
shareholders on the register at the close of business on 2 July 2021 which, together with the net interim dividend of 6.2p per
ordinary share paid on 8 January 2021, results in a total net dividend for the year of 26.0p per share (FY20: 23.6p).
Political donations
No political donations were made during the year.
Rules on appointment and replacement of Directors
All of the ongoing Directors will seek election or re-election at the AGM in accordance with the Company’s Articles of
Association and the recommendations of the Code.
A Director may be appointed by ordinary resolution of the shareholders in a general meeting following nomination by the
Board or a member (or members) entitled to vote at such meetings. In addition, the Directors may appoint a Director to fill a
vacancy or as an additional Director, provided that the individual seeks election at the next AGM.
A Director may be removed by the Company in certain circumstances set out in the Articles of Association or by an ordinary
resolution of the Company.
Directors’ indemnities and insurance
The Company has made qualifying third party indemnity provisions for the benefit of its Directors which were in place during
the year and remain in force at the date of this report. The Company maintains Directors’ and officers’ liability insurance for its
Directors and officers.
Articles of Association
The powers of the Directors are set out in the Company’s Articles of Association which are available on request. The Articles
of Association may be changed by special resolution.
Capital Structure
Details of the issued share capital, together with details of shares issued during the year, are set out in note 28. There is one
class of ordinary shares which carries no right to fixed income. Each share carries the right to one vote at a general meeting of
the Company.
There are no specific restrictions on the size of a holding or on the transfer of shares, which are both governed by the general
provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between
holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.
Details of employee share schemes are set out in note 32. No votes are cast in respect of the shares held in the Employee
Benefit Trust and dividends are waived.
No person has any special rights of control over the Company’s share capital and all issued shares are fully paid. Subject to
the Companies Act 2006 and any relevant authority of the Company in general meeting, the Company has authority to issue
new shares.
The AGM held in 2020 authorised the Directors to allot shares in the capital of the Company within certain limited
circumstances and as permitted by the Companies Act. A renewal of this authority will be proposed at the 2021 AGM.
Authority to purchase shares
The Company was authorised at the 2020 AGM to purchase its own shares, within certain limits and as permitted by the
Articles of Association. A renewal of this authority will be proposed at the 2021 AGM. No shares were purchased during the
year and no shares are held in Treasury.
HomeServe plc Annual Report & Accounts 2021 Governance
Directors’ report
121
Significant agreements – change of control
There are a number of agreements that take effect, alter or terminate upon a change of control of the Company such as
commercial contracts, bank loan agreements, property lease arrangements and employees’ share plans. None of these
are considered to be significant in terms of their likely impact on the business of the Group as a whole. Furthermore,
the Directors are not aware of any agreements between the Company and its Directors and employees that provide for
compensation for loss of office or employment that occurs because of a takeover bid.
Annual General Meeting
The 2021 Annual General Meeting of the Company will be held on 16 July 2021.
Fixed Assets
Capital expenditure on tangible fixed assets amounted to £7.1m (FY20: £8.5m) during the year.
Directors’ interests in shares
The beneficial interests of the Directors in the shares of the Company and the options held as at 31 March and 18 May 2021
are set out in the Remuneration report on page 112. None of the Directors serving at the year end had a beneficial interest in
the share capital of any subsidiary company.
Substantial Shareholdings
As far as the Directors are aware, no person or company had a beneficial interest in 3% or more of the voting share capital at
31 March and 18 May 2021, except for the following:
Name
R Harpin
Baillie Gifford & Co
T Rowe Price Associates Inc
BlackRock Inc
As at 31 March 2021
ordinary shares
40,790,004
21,949,959
16,904,551
16,763,157
%
12.1
6.5
5.0
5.0
As at 18 May 2021
ordinary shares
40,790,030
21,949,959
16,769,101
17,023,125
%
12.1
6.5
5.0
5.0
Taxation status
The Company is not a close company within the meaning of the Income and Corporation Taxes Act 1988.
By Order of the Board
Anna Maughan
Company Secretary
18 May 2021
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 122 Governance
Statements of responsibilities
Statements of responsibilities
The Directors are responsible for preparing the Annual Report & Accounts, Remuneration report and the financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors
are required to prepare the Group financial statements under international accounting standards in conformity with the
requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) adopted pursuant to
Regulation (EC) No 1606/2002 as it applies to the European Union. Under company law, the Directors must not approve the
accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or
loss of the Company for that period. In preparing these financial statements, the Directors are required to:
• properly select and apply accounting policies
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users
to understand the impact of particular transactions, other events and conditions on the entity’s financial position and
financial performance
•
make an assessment of the Company’s ability to continue as a going concern.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company’s
transactions and that disclose with reasonable accuracy at any time the financial position of the Company and enable them
to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Disclosure of Information to Auditor
Each of the Directors confirms that:
•
•
so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
the Director has taken all the steps that he or she ought to have taken as a Director in order to make himself or herself
aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Resolutions proposing the reappointment of Deloitte LLP as auditor and authorising the Board to determine its remuneration
will be put to the Annual General Meeting.
Website publication
The Directors are responsible for ensuring the Annual Report, including the financial statements, is made available on a
website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company’s website (www.homeserveplc.com) is the responsibility of the Directors.
The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
HomeServe plc Annual Report & Accounts 2021 Governance
Statements of responsibilities
123
Directors’ responsibility statement
We confirm to the best of our knowledge:
•
•
the financial statements, prepared in accordance with IFRSs in conformity with the requirements of the Companies Act
2006 and IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and
profit or loss of the company and the undertakings included in the consolidation taken as a whole;
the Directors’ report, together with the Strategic report, which represent the Management Report, include a fair review of
the development and performance of the business and the position of the company and the undertakings included in the
consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
By Order of the Board
Richard Harpin
Chief Executive Officer
18 May 2021
David Bower
Chief Financial Officer
18 May 2021
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Independent Auditor’s report
to the members of HomeServe plc
Opinion
In our opinion:
•
•
•
the financial statements of HomeServe plc (the ‘parent company’) and its subsidiaries (the ‘Group’) give a true and fair view
of the state of the Group’s and of the parent company’s affairs as at 31 March 2021 and of the Group’s profit for the year
then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006, and International Financial Reporting Standards (IFRSs) as
adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
•
•
•
•
•
•
the Group income statement;
the Group and parent company statements of comprehensive income;
the Group and parent company balance sheets;
the Group and parent company statements of changes in equity;
the Group and parent company cash flow statements; and
the related notes 1 to 50.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable
law, and international accounting standards in conformity with the requirements of the Companies Act 2006, and IFRSs as
adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and international accounting standards in conformity with the requirements
of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard
as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. The non-audit services provided to the Group and parent company for the year are disclosed in note 5 to the
financial statements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to
the Group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• carrying value of goodwill;
•
•
impairment of the UK’s eServe Customer Relationship Management (‘eServe’) system; and
revenue deferrals
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
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Materiality
The materiality that we used for the Group financial statements was £7.4m which was determined on the basis of less than
0.6% of revenue.
Scoping
The following operating segments were subject to a full scope audit:
Membership and HVAC:
• United Kingdom;
• North America;
• France; and
• Spain.
Home Experts:
• United Kingdom; and
• North America.
The ‘Membership and HVAC – New Markets’ and ‘Home Experts – Other’ operating segments were subject to specific audit
procedures.
Following the acquisition of eLocal in the prior year, the ‘Home Experts – North America’ segment was subject to a full scope
audit for the first time in the year ended 31 March 2021.
Significant changes in our approach
In the prior year the Group’s materiality was determined on the basis of 5% of profit before tax. In the current year, materiality
has been determined on the basis of 0.6% of revenue. Please refer to our application of materiality section for further details.
During the year, management has fully impaired the new eServe system, resulting in impairment charges of £82.6m
(FY20: £nil) being incurred by the Group. Following management’s impairment review and the decision to fully impair the
eServe system, we have amended our key audit matter in relation to eServe to focus on the assumptions underpinning the
impairment decision and the £nil valuation of the asset.
In the prior year we identified the Group’s acquisition of 79% of eLocal to be a key audit matter, in relation to the valuation of
eLocal acquisition intangibles and the valuation of the put option over the remaining 21% equity interest. As this was related
purely to the opening fair value assessment, this area has not been identified as a key audit matter for the year ended 31
March 2021.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and parent company’s ability to continue to adopt the going
concern basis of accounting included:
• evaluating management’s going concern assessment, which included specific consideration of the impacts of the COVID
pandemic and the Group’s operational resilience, in order to understand, challenge and assess the key judgements made
by management;
• obtaining an understanding of the Group’s process and relevant controls around management’s going concern
assessment;
•
reviewing management’s three year business plan and regulatory correspondence across the Group;
• assessing compliance with the covenant conditions attached to the Group’s lending facilities;
•
reviewing post year end performance and assessing the historical accuracy of forecasts prepared by management; and
• assessing the appropriateness of the disclosures made in the financial statements surrounding going concern and the
principal risks and uncertainties that the Group is facing.
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Continued
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s and parent company’s ability to continue as a going
concern for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Carrying value of goodwill
Key audit matter description
The carrying value of goodwill is £564.3m (FY20: £509.9m).
Management’s goodwill impairment analysis is completed at an individual cash generating unit (‘CGU’) basis. The Group’s
assessment of the carrying value of goodwill is a judgemental process which requires estimates concerning the future cash
flows of each CGU and associated discount rates. We identified key audit matters in the following areas:
•
•
the accuracy of the weighted average cost of capital (‘WACC’) for each CGU used to discount the cash flows within the
Group’s impairment assessment; and
the cash flow forecasts used for the Home Experts division, comprising Checkatrade, Habitissimo and eLocal. The Home
Experts division has been most heavily impacted by the COVID pandemic, Checkatrade and Habitissimo are currently loss
making and the value in use assessments are highly sensitive to variations in the short-term cash flow growth assumptions,
particularly in the year three projection.
Having made their assessment, management determined that no impairment was required, however, as disclosed in notes 3
and 13, a reasonably plausible change in operational cash flows in the CGUs could result in an impairment of goodwill.
Further detail on the key judgements involved is set out within the Audit and Risk Committee report on page 87, significant
accounting policies in note 2, the key sources of estimation uncertainty in note 3 and note 13 to the financial statements.
How the scope of our audit responded to the key audit matter
We first understood the Group’s process and key controls around the carrying value of goodwill, specifically the Group
review process to assess the accuracy and completeness of key assumptions within the impairment assessment.
We assessed the Group’s WACC working with our internal valuations specialists. We benchmarked assumptions to external
macro-economic and market data and independently determined the WACC rate for each CGU.
We challenged the Group’s key assumptions relating to the estimated future cash flows applied to the Home Experts
businesses. Our procedures included:
• challenging the reasonableness of the Group’s assessment of the cash flow forecasts and growth rates applied for the
Home Experts businesses, particularly Checkatrade and Habitissimo, given that both businesses are currently loss making
and have significant growth forecasts over the next three years. This included understanding the key drivers of growth; and
• assessing the Group’s ability to accurately forecast business performance with reference to historical trading performance
and assessing the businesses performance throughout the COVID pandemic as well as any potential impact on future
business performance.
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We have reviewed the consistency of the key assumptions used in the carrying value of goodwill assessment to the budget
used by the Group to assess longer term-viability and going concern.
We have considered the appropriateness of management’s carrying value of goodwill disclosures, including the potential
impact on headroom under a range of alternative lockdown scenarios, in line with guidance from IAS 36 – Impairment of
assets and IAS 1 – Presentation of financial statements.
Key observations
We assessed the impact of using our independent WACC rate in management’s impairment calculation, noting that it
reduced the level of headroom within the Home Experts CGUs, however it did not indicate that an impairment write down
was required.
We concluded that other key assumptions used within the Group’s goodwill impairment assessment were acceptable.
We consider management’s conclusions regarding the carrying value of goodwill to be reasonable as at 31 March 2021.
We consider management’s disclosures in note 3 in relation to Checkatrade and note 13 in relation to Habitissimo to be
appropriate, which indicate that a reasonably plausible change in operational cash flows in the CGUs could result in an
impairment of goodwill.
Impairment of the UK’s ‘eServe’ Customer Relationship Management system
Key audit matter description
Management has been developing the new UK eServe Customer Relationship Management (‘eServe’) system since 2013.
During the second half of the year, management identified a number of system capability issues associated with the eServe
system and as a result, fully impaired the system, resulting in impairment charges of £82.6m (FY20: £nil). In addition, a
provision of £2.2m has been recognised for onerous contracts associated with the eServe system. Total charges of £84.8m
have been treated as exceptional in the Group’s income statement due to their size, nature and incidence.
Following management’s impairment review and the decision to fully impair the eServe system, we identified a key audit
matter focussing on the assumptions underpinning the value-in-use calculation, the impairment decision and the £nil
valuation of the asset.
Further detail on the key judgements involved is set out within the Audit and Risk Committee report on page 87, significant
accounting policies in note 2 and note 7 to the financial statements.
How the scope of our audit responded to the key audit matter
We first understood management’s process and relevant controls in relation to the impairment assessment, specifically
the Group’s process to assess the accuracy and completeness of key assumptions used to determine the value-in-use
calculation.
We assessed the indicators of impairment identified by management against the requirements of IAS 36. We challenged
management’s value-in-use computation by assessing whether the nature of the cash flows that management has taken into
account are consistent with the requirements of IAS 36 – Impairment of assets and verifying the accuracy of estimated cash
flows used in the computation.
We engaged our IT specialists to challenge management’s conclusions in technical areas such as the assumptions relating to
the repatriation of policies from the new eServe system back onto the existing system.
We have challenged the completeness of management’s assessment of onerous contracts and other provisions in
accordance with IAS 37 - Provisions, contingent liabilities and contingent assets in relation to their decision to discontinue the
eServe system and fully impair the asset.
We have reviewed management’s disclosures in the financial statements relating to the impairment of the eServe system and
its presentation as an exceptional item.
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Continued
Key observations
We are satisfied the cash flows applied in management’s impairment assessment are reasonable in determining the eServe
system’s value-in-use.
Overall we consider management’s decision to impair the eServe system down to £nil to be reasonable.
We also consider management’s disclosures on the impairment of the eServe system to be reasonable, as well as its
presentation as an exceptional item.
Revenue deferrals
Key audit matter description
The recognition of revenue is an important area of estimation which requires significant judgement by the Group to
determine key assumptions, particularly regarding the level of revenue to defer in the Membership and HVAC division in order
to satisfy the Group’s obligations for future claims handling and non-recoverable costs incurred by HomeServe’s directly
employed operations.
Given the degree of judgement and estimation involved in determining the level of revenue to defer, we also identified that
there is a potential for fraud through possible manipulation of this balance.
The total amount of revenue deferred at 31 March 2021 in respect of the Group’s future claim handling obligations is
£18.9m (FY20: £19.1m). The total amount of revenue deferred at 31 March 2021 in respect of the Group’s directly employed
operations is £21.8m (FY20: £18.9m).
The key assumptions used by the Group for claims handling and directly employed operations are the directly employed
engineer rate, claims profiles and the average cost per claim, which are based on recent behavioural experience.
Further detail on the Group’s revenue recognition policy is set out within the Audit and Risk Committee report on page 87,
significant accounting policies in note 2 and the associated key judgements involved are set out in the critical accounting
judgements and key sources of estimation uncertainty in note 3 to the financial statements.
How the scope of our audit responded to the key audit matter
We first understood the Group’s process and relevant controls around the revenue deferrals. Specifically, controls that the
Group has in place to manage the risk of inappropriate assumptions being used within the revenue deferrals.
We assessed the Group’s policy for deferring revenue, including considering whether the policy is in accordance with current
accounting standards, IFRS 15 – Revenue from contracts with customers.
We challenged the key inputs and assumptions used in the revenue deferral calculations. As part of this, we specifically
considered whether any adjustments were required to revenue deferrals in light of the COVID pandemic through review of
current behavioural experience, as well as forecast volumes during the recovery period:
• For cost per claim we compared budgeted costs to previous actual behaviour;
• We re-calculated directly employed engineer rates based on previous claims data; and
• For claims profiles we substantively tested policy information and agreed underwriter rates to third party information.
We substantively tested the source data to underlying supporting evidence.
Additionally, we have assessed if management was consistent in implementing the calculations across the Membership and
HVAC division and in line with Group policy.
Key observations
We concluded that the key assumptions used in estimating the revenue deferrals for the Group were reasonable.
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Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the
scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
£7.4m (FY20: £7.3m)
£3.7m (FY20: £3.7m)
Basis for
determining
materiality
Rationale for
the benchmark
applied
Less than 0.6% of revenue (FY20: 5% of profit
before tax)
Parent company materiality equates to 0.8% (FY20:
0.9%) of net assets, which is capped at 50% of
Group materiality.
The Company is the parent company for the
Group and is not a trading entity, hence we
considered this to be the most appropriate
measure for the Company.
We have transitioned to using 0.6% of revenue as
our materiality benchmark. We consider revenue
to be less susceptible to business seasonality and
to provide a more stable benchmark than profit
before tax.
Further, we note revenue is also considered a key
metric for users of the financial statements. Our
prior year materiality equated to 0.6% of prior year
revenue.
The materiality we have determined is less than 5%
of statutory PBT when excluding the exceptional
impairment charge of the eServe system.
Revenue
£1,304.7m
Revenue
Group materiality
Group materiality
£7.4m
Component materiality
range £2.6m to £3.6m
Audit & Risk Committee
reporting threshold £0.37m
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Continued
Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole.
Performance
materiality
Basis and
rationale for
determining
performance
materiality
Group financial statements
Parent company financial statements
70% (FY20: 70%) of Group materiality
70% (FY20: 70%) of parent company materiality
In determining performance materiality, we considered a number of factors, including:
•
•
•
•
•
the level of decentralisation and autonomy displayed by the operating segments of the Group;
the level of growth within the Group including the number of acquisitions completed during the year;
the nature, volume and size of uncorrected and corrected misstatements in the previous year;
the quality of the control environment; and
the impact of the COVID pandemic on the control environment.
Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of
£367,500 (FY20: £360,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative
grounds. We also report to the Audit and Risk Committee on disclosure matters that we identified when assessing the overall
presentation of the financial statements.
An overview of the scope of our audit
Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide
controls, and assessing the risks of material misstatement at the Group level. Based on that assessment, we focused our
Group audit scope primarily on the following operating segments:
Membership and HVAC:
• United Kingdom;
• North America;
• France; and
• Spain.
Home Experts:
• United Kingdom; and
• North America.
The ‘Membership and HVAC – New Markets’ and ‘Home Experts – Other’ operating segments were subject to specified audit
procedures.
Following the acquisition of eLocal in the prior year, the ‘Home Experts – North America’ segment was subject to a full scope
audit for the first time in the year ended 31 March 2021.
The operating segments subject to a full scope audit account for 99% (FY20: 97%) of the Group’s revenue and 100% (FY20:
100%) of the Group’s profit before tax. They were also selected to provide an appropriate basis for undertaking audit work to
address the risks of material misstatement identified above. Our audit work for these operating segments was executed at
levels of materiality ranging from £2.6m to £3.6m (FY20: £2.5m to £3.5m).
At the parent company level we also tested the consolidation process and carried out analytical procedures to confirm
our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the
remaining segments not subject to audit or audit of specified account balances.
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Working with other auditors
We have previously followed a programme of planned visits in which at least two senior members of the UK based Group
audit team physically visited our component auditors in North America, France and Spain.
As a result of the COVID pandemic, we were unable to conduct our component visits. In response to this we increased
the frequency of our communications with each component to monitor progress. At least two senior members attended
each component planning and audit close meeting, which was held via videoconference. We issued referral instructions to
all significant component audit teams and interacted with them throughout the audit process. In the absence of fieldwork
component visits, we used videoconferencing to review component audit documentation.
Other information
The other information comprises the information included in the Annual Report, other than the financial statements and our
auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent company’s ability
to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Group or the parent company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to
which our procedures are capable of detecting irregularities, including fraud is detailed below.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance
with laws and regulations, we considered the following:
•
•
the nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
results of our enquiries of management, internal audit and the Audit and Risk Committee about their own identification
and assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures
relating to:
- identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance;
- detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged
fraud;
- the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
•
the matters discussed among the audit engagement team including significant component audit teams and relevant
internal specialists, including tax, valuations, pensions, financial instrument and IT specialists regarding how and where
fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for
fraud and identified the greatest potential for fraud in relation to revenue deferrals. In common with all audits under ISAs (UK),
we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on
provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in
the financial statements. The key laws and regulations we considered in this context included the UK Companies Act, Listing
Rules, UK Corporate Governance Code and local tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty.
These included compliance with Financial Conduct Authority regulation for the UK operating segment and compliance with
local legislation for the overseas operating segments.
Audit response to risks identified
As a result of performing the above, we identified revenue deferrals as key audit matter related to the potential risk of fraud.
The key audit matters section of our report explains the matter in more detail and also describes the specific procedures we
performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
•
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as having a direct effect on the financial statements;
• enquiring of management, the Audit and Risk Committee, in-house and external legal counsel concerning actual and
potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
•
reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing
correspondence with the Financial Conduct Authority; and
HomeServe plc Annual Report & Accounts 2021 Governance
Independent Auditor’s report to the members of HomeServe plc
133
•
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and
other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential
bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course
of business. We also obtained an understanding of provisions and held discussions with management to understand the
basis of recognition or non-recognition of tax provisions.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
including internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with
the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
•
the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in
the course of the audit, we have not identified any material misstatements in the Strategic report or the Directors’ report.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that
part of the Corporate governance statement relating to the Group’s compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
•
•
•
•
•
the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on page 55;
the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the
period is appropriate set out on page 54;
the Directors’ statement on fair, balanced and understandable set out on page 88;
the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 88;
the section of the annual report that describes the review of effectiveness of risk management and internal control
systems set out on pages 81 to 83; and
•
the section describing the work of the audit committee set out on page 85.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
GOVERNANCEHomeServe plc Annual Report & Accounts 2021 134 Governance
Independent Auditor’s report to the members of HomeServe plc
Independent Auditor’s report
to the members of HomeServe plc
Continued
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration
have not been made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
Other matters which we are required to address
Auditor tenure
Following the recommendation of the Audit and Risk Committee, we were appointed by the Board of Directors on 1 August
2002 to audit the financial statements for the year ending 31 March 2003 and subsequent financial periods. The period of
total uninterrupted engagement including previous renewals and reappointments of the firm is 19 years, covering the years
ending 31 March 2003 to 31 March 2021.
Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the Audit and Risk Committee we are required to provide in
accordance with ISAs (UK).
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Peter Birch FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Leeds, UK
18 May 2021
HomeServe plc Annual Report & Accounts 2021 Participating in the
transition to a lower
carbon future
Financial statements
Contents
135
We want to make
our business
greener and help
our customers
make their homes
greener
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Financial statements
Group financial statements
Company financial statements
Five year summary
Glossary
136
188
208
209
HomeServe plc Annual Report & Accounts 2021
136 Financial statements
Group income statement
Group income statement
Year ended 31 March 2021
Continuing operations
Revenue
Operating costs
Share of results of equity accounted investments
Operating profit
Investment income
Finance costs
Adjusted profit before tax
Amortisation of acquisition intangibles
Certain transaction related costs
Exceptional items
Profit before tax
Tax
Profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Dividends per share, paid and proposed
Earnings per share
Basic
Diluted
Notes
4
5
18
8
9
5
7
7
10
11
12
12
2021
£m
1,304.7
(1,230.4)
(2.5)
71.8
0.4
(25.0)
191.3
(45.0)
(6.7)
(92.4)
47.2
(15.4)
31.8
31.1
0.7
31.8
26.0p
9.3p
9.2p
2020
£m
1,132.3
(971.6)
(2.1)
158.6
0.5
(21.2)
181.0
(35.5)
—
(7.6)
137.9
(32.1)
105.8
106.0
(0.2)
105.8
23.6p
31.7p
31.5p
HomeServe plc Annual Report & Accounts 2021
Financial statements
Group statement of comprehensive income
137
Group statement of comprehensive income
Year ended 31 March 2021
Profit for the year
Items that will not be reclassified subsequently to profit and loss:
Re-measurement (loss)/gain on defined benefit pension schemes
Deferred tax credit/(charge) relating to re-measurements
Fair value gain/(loss) on "fair value through other comprehensive income"
(FVTOCI) investments in equity instruments
Deferred tax (charge)/credit relating to fair value movements on FVTOCI
investments in equity instruments
Notes
33
10
17
10
Items that may be reclassified subsequently to profit and loss:
Exchange movements on translation of foreign operations
Exchange movements on non-controlling interests
Total other comprehensive (expense)/income
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
2021
£m
31.8
(4.5)
0.9
4.6
(1.3)
(0.3)
(26.4)
(1.1)
(27.5)
(27.8)
4.0
4.4
(0.4)
4.0
2020
£m
105.8
1.6
(0.3)
(3.7)
0.8
(1.6)
14.1
—
14.1
12.5
118.3
118.5
(0.2)
118.3
FINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
138 Financial statements
Group balance sheet
Group balance sheet
31 March 2021
Non-current assets
Goodwill
Other intangible assets
Contract costs
Right-of-use assets
Property, plant and equipment
Equity accounted investments
Other investments
Other financial assets
Deferred tax assets
Retirement benefit assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Bank and other loans
Current tax liabilities
Lease liabilities
Provisions
Net current assets
Non-current liabilities
Bank and other loans
Trade and other payables
Deferred tax liabilities
Lease liabilities
Retirement benefit obligations
Total liabilities
Net assets
Equity
Share capital
Share premium account
Share incentive reserve
Currency translation reserve
Investment revaluation reserve
Other reserves
Retained earnings
Attributable to equity holders of the parent
Non-controlling interests
Total equity
Notes
13
14
4
26
15
18
17
27
10
33
19
20
21
22
25
25
24
25
23
10
25
33
28
29
29
29
29
29
30
2021
£m
564.3
391.3
8.2
48.6
41.7
0.8
12.9
1.2
12.8
8.3
1,090.1
12.2
501.0
2.5
171.4
687.1
1,777.2
(454.9)
(54.0)
(9.2)
(12.7)
(6.0)
(536.8)
150.3
(579.8)
(31.8)
(15.3)
(38.6)
(1.2)
(666.7)
(1,203.5)
573.7
9.1
196.4
18.6
10.6
2.7
79.2
247.4
564.0
9.7
573.7
2020
£m
509.9
497.1
16.8
56.8
42.0
4.0
5.6
—
6.0
10.3
1,148.5
7.9
495.4
—
131.2
634.5
1,783.0
(410.6)
(40.3)
(5.4)
(14.1)
(2.0)
(472.4)
162.1
(540.6)
(52.3)
(26.2)
(45.2)
—
(664.3)
(1,136.7)
646.3
9.0
189.3
21.9
37.0
(0.6)
79.2
299.9
635.7
10.6
646.3
The financial statements were approved by the Board of Directors and authorised for issue on 18 May 2021. They were signed on its behalf by:
David Bower
Chief Financial Officer
18 May 2021
HomeServe plc Annual Report & Accounts 2021
Financial statements
Group statement of changes in equity
139
Group statement of changes in equity
Year ended 31 March 2021
Balance at 1 April 2020
Profit for the year
Other comprehensive expense
for the year
Total comprehensive income
Dividends paid (note 11)
Issue of share capital (note 28)
Share-based payments
Share options exercised
Tax on exercised share options (note 10)
Deferred tax on share options (note 10)
Changes in non-controlling interests
Share
capital
£m
Share
premium
account
£m
Share
incentive
reserve
£m
Currency
translation
reserve
£m
Investment
revaluation
reserve
£m
Other
reserves 1
£m
Retained
earnings
£m
Attributable
to equity
holders of
the parent
£m
Non-
controlling
interests
£m
Total
equity
£m
9.0
189.3
21.9
37.0
(0.6)
79.2
299.9
635.7
10.6
646.3
—
—
—
—
0.1
—
—
—
—
—
—
—
—
—
7.1
—
—
—
—
—
—
—
—
—
—
3.8
(7.1)
—
—
—
—
—
—
31.1
31.1
0.7
31.8
(26.4)
(26.4)
3.3
3.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3.6)
27.5
(26.7)
4.4
(1.1)
(0.4)
(27.8)
4.0
(80.5)
(80.5)
—
—
—
1.5
(1.0)
—
7.2
3.8
(7.1)
1.5
(1.0)
—
—
—
—
—
—
—
(0.5)
(80.5)
7.2
3.8
(7.1)
1.5
(1.0)
(0.5)
Balance at 31 March 2021
9.1
196.4
18.6
10.6
2.7
79.2
247.4
564.0
9.7
573.7
Year ended 31 March 2020
Balance at 1 April 2019
Profit for the year
Other comprehensive income
for the year
Total comprehensive income
Dividends paid (note 11)
Issue of share capital (note 28)
Purchase of own shares
Share-based payments
Share options exercised
Tax on exercised share options (note 10)
Deferred tax on share options (note 10)
Changes in non-controlling interests
Obligations under put options
Share
capital
£m
Share
premium
account
£m
Share
incentive
reserve
£m
Currency
translation
reserve
£m
Investment
revaluation
reserve
£m
Other
reserves 1
£m
Retained
earnings
£m
Attributable
to equity
holders of
the parent
£m
Non-
controlling
interests
£m
Total
equity
£m
9.0
180.7
23.3
22.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8.6
—
—
—
—
—
—
—
—
—
—
—
—
—
7.2
(8.6)
—
—
—
—
—
14.1
14.1
—
—
—
—
—
—
—
—
—
2.3
—
(2.9)
(2.9)
—
—
—
—
—
—
—
—
—
82.2
293.0
613.4
0.2
613.6
—
106.0
106.0
(0.2)
105.8
—
—
—
—
(3.0)
—
—
—
—
—
—
1.3
107.3
12.5
118.5
—
(0.2)
12.5
118.3
(73.5)
(73.5)
—
—
—
0.1
3.0
(1.2)
—
8.6
(3.0)
7.2
(8.5)
3.0
(1.2)
—
—
—
—
—
—
—
—
(73.5)
8.6
(3.0)
7.2
(8.5)
3.0
(1.2)
10.6
10.6
(28.8)
(28.8)
—
(28.8)
Balance at 31 March 2020
9.0
189.3
21.9
37.0
(0.6)
79.2
299.9
635.7
10.6
646.3
1 Other reserves comprise the Merger, Own shares and Capital redemption reserves. Full details of these reserves are included in Note 29.
FINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 140 Financial statements
Group cash flow statement
Group cash flow statement
Year ended 31 March 2021
Net cash inflow from operating activities
Investing activities
Interest received
Proceeds on disposal of fixed assets
Purchases of intangible assets
Contract costs
Purchases of property, plant and equipment
Disposal of equity accounted investment
Contribution to equity accounted investee
Disposal of subsidiary
Acquisition of subsidiaries
Net cash used in investing activities
Financing activities
Dividends paid
Repayment of lease principal
Acquisition of non-controlling interests
Purchase of own shares
Proceeds on issue of share capital
New bank and other loans raised
Costs associated with new bank and other loans raised
Proceeds from loans and borrowings
Repayment of loans and borrowings
Net cash (used in)/generated by financing activities
Net increase in cash and cash equivalents, net of bank overdrafts
Cash and cash equivalents, net of bank overdrafts, at the beginning of the year
Impact of foreign exchange rate changes
Cash and cash equivalents, net of bank overdrafts, at the end of the year
Notes
31
18
18
16
16
11
25
7
29
29
25
25
25
25
2021
£m
223.0
0.1
0.3
(62.8)
(1.5)
(7.1)
—
(2.2)
(3.9)
(77.3)
(154.4)
(80.5)
(14.8)
—
—
—
243.4
(2.2)
27.1
(214.6)
(41.6)
27.0
131.2
(8.8)
149.4
2020
£m
192.0
0.5
0.5
(74.3)
(3.9)
(8.2)
8.4
—
—
(140.6)
(217.6)
(73.5)
(12.4)
(7.7)
(3.0)
0.1
—
(0.8)
206.6
(24.0)
85.3
59.7
72.6
(1.1)
131.2
HomeServe plc Annual Report & Accounts 2021
141
Notes to financial statements
Year ended 31 March 2021
1. General information
HomeServe plc (the ‘Company’) is a public company, limited by shares and incorporated in England and Wales under the Companies Act.
The address of the registered office is Cable Drive, Walsall, WS2 7BN.
These financial statements are presented in pounds sterling. Foreign operations are consolidated in accordance with the policies set out in
note 2.
2. Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements
of the Companies Act 2006 and prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union. The financial statements have been prepared on the historical cost basis, except for
certain financial instruments that are measured at fair value at the end of each reporting period as explained in note 27.
Adoption of new or revised standards
The following accounting standards, interpretations and amendments have been adopted in the year:
Amendments to IFRS 3
Amendments to IFRS 9, IAS 39 and IFRS 7
Amendments to IAS 1 and IAS 8
Amendments to IFRS 16
Conceptual Framework
Definition of a Business
Interest Rate Benchmark Reform
Definition of Material
COVID-19 Related Rent Concessions
Amendments to References to the Conceptual Framework in IFRS Standards
None of the items listed above have had any material impact on the amounts reported in this consolidated set of financial statements.
Changes in accounting policies
Non-IFRS measures
During the year ended 31 March 2021 the Group revised its accounting policy regarding adjusting items in the calculation of certain
non-IFRS measures to include 'certain transaction related costs' as an adjusting item. For further detail, including the definition of certain
transaction related costs please see accounting policy 'adjusting and exceptional items’ below. Comparatives were not restated as
unadjusted charges meeting the definition of certain transaction related costs in FY20 were highly immaterial.
Inventory
The Group has historically valued inventory on a first-in, first-out (“FIFO”) basis net of any provisions. In recent years the Group has acquired
several HVAC businesses and, due to their nature, these businesses have high levels of homogeneous inventory items that do not fluctuate
significantly in price. The nature of inventory in these businesses, alongside the fact that they now comprise a majority of the Group’s
inventory balance, makes a weighted average cost (“WAC”) valuation basis the most relevant inventory valuation approach for the Group and
consequently the Group’s inventory valuation accounting policy has been changed. The impacts of this change in accounting policy on
FY20 reported figures were found to be immaterial and therefore comparatives have not been restated.
Inventories are stated at the lower of cost and net realisable value. Costs comprise direct material cost only. Cost is measured on a weighted
average cost basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred
in marketing, selling and distribution. Provision is made for obsolete, slow moving or defective items where appropriate.
Standards in issue but not yet effective
At the date of authorisation of these financial statements the following Standards and Interpretations, which have not been applied in these
financial statements, were in issue but not yet effective:
IFRS 17
Amendments to IFRS 10 and IAS 28
Amendments to IAS 1
Amendments to IFRS 3
Amendments to IAS 16
Amendments to IAS 37
Annual Improvements to IFRSs
Insurance Contracts
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Classification of liabilities as Current or Non-Current
Reference to Conceptual Framework
Property, Plant and Equipment – Proceeds before Intended Use
Onerous Contracts – Costs of Fulfilling a Contract
Standards 2018 - 2020 Cycle
The Directors do not expect that the adoption of the Standards and Interpretations listed above will have a material impact on the financial
statements of the Group in future years.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, including the potential impacts of the COVID
pandemic and Brexit, performance and position are set out in the Strategic report.
The Directors have reviewed the Group’s budget, forecast and cash flows for 2021 and beyond, and concluded that they are in line with
their expectations with regards to the Group’s strategy and future growth plans. In addition, the Directors have reviewed the Group’s
position in respect of material uncertainties and have concluded that there are no items that would affect going concern or that should be
separately disclosed.
The Directors have concluded that they have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
142
Notes to financial statements
Year ended 31 March 2021
2. Significant accounting policies (continued)
Other accounting policies
The following accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the
Group in its consolidated financial statements as at, and for the year ended, 31 March 2020:
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company made
up to 31 March each year. Control is achieved where the Company has the power to govern the financial and operating policies of an
investee entity, is exposed or has rights to variable returns from its involvement with the investee, and has the ability to use its power to affect
its returns.
Non-controlling interests in the net assets of the consolidated subsidiaries are identified separately from the Group’s equity interest. Non-
controlling interests consist of those interests at the date of the original business combination and the minority’s share of the changes in
equity since the date of the combination.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those
used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
Foreign currencies
Transactions in currencies other than a Group entity’s functional currency are recorded at the rates of exchange prevailing on the dates of
the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies except for those that
are designated as long-term equity investments, are retranslated at the rates prevailing on the balance sheet date, with changes taken to
the income statement. Foreign exchange translation movements on monetary assets that are designated as long-term equity investments
are transferred to the Group’s translation reserve. Non-monetary items that are measured at historical cost in a foreign currency are not
retranslated.
Borrowings in foreign currencies are treated as monetary liabilities and are translated at the rates prevailing on the balance sheet date.
Exchange rate movements on foreign currency borrowings are recognised immediately in the income statement. Foreign currency
borrowings are not treated as hedges of net investments.
On consolidation, the assets and liabilities of the Group’s overseas operations are translated to presentational currency at exchange
rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period unless
exchange rates fluctuate significantly. Exchange movements, if any, are classified as equity and transferred to the Group’s translation reserve.
Such cumulative exchange movements are recognised as income or expense in the period in which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
Revenue recognition
The Group records revenue in accordance with the five-step recognition model outlined in IFRS 15:
1)
Identify the contract with the customer
2)
Identify the performance obligations in the contract
3) Determine the transaction price
4) Allocate the transaction price to the performance obligations
5) Recognise revenue when (or as) each performance obligation is satisfied.
Revenue is recognised, net of discounts, VAT, Insurance Premium Tax and other sales related taxes, either at the point in time a performance
obligation has been satisfied or over time as control of the asset associated with the performance obligation is transferred to the customer.
For all contracts identified, the Group determines if the arrangement with the customer creates enforceable rights and obligations. For
contracts with multiple components to be delivered, such as those with underwriters to sell policies on behalf of the underwriter as well
as deliver claims handling and administration services, management applies judgement to consider whether those promised goods and
services are:
i) distinct – to be accounted for as separate performance obligations;
ii) not distinct – to be combined with other promised goods or services until a bundle is identified that is distinct; or
iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer.
At contract inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has present
enforceable rights to under the contract. Where applicable, this includes management’s best estimate of any variable consideration to
be included in the transaction price based on the expected value or most likely amount approach, and only to the extent that it is highly
probable that no significant revenue reversal will occur.
Once the total transaction price is determined, the Group allocates this to the identified performance obligations in proportion to their
relative standalone selling prices and recognises revenue when (or as) those performance obligations are satisfied.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 143
Where available, observable prices of goods or services are utilised, when that good or service is sold separately, to similar customers in
similar circumstances. Where a standalone selling price is not directly observable the Group applies judgement to determine an appropriate
estimated standalone selling price, typically using an expected cost plus margin, adjusted market assessment or residual approach.
Variable consideration is allocated to an entire contract or a specific part of a contract depending on:
i) whether allocating the variable amount entirely to part of the contract depicts the amount of consideration the Group expects to be
entitled to in exchange for transferring the promised good or service to the customer; or
ii)
the terms of the variable payment relate specifically to the satisfaction of an individual performance obligation.
The Group’s variable consideration primarily relates to intermediary commissions received on contracts with underwriters to sell policies
and provide claims handling and administration services. Amounts are typically allocated to the entire contract.
Discounts are allocated proportionally across all performance obligations in the contract unless directly observable evidence exists that the
discount relates to one or more, but not all, performance obligations.
For each performance obligation, the Group determines if revenue will be recognised over time or at a point in time. For each performance
obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group’s performance
in transferring control of the goods or services to the customer. This decision requires assessment of the nature of the goods or services
that the Group has promised to transfer to the customer. The Group applies the relevant output or input method, typically based on the
expected profile of the deferral event (for example claims handling cost through the policy term or time elapsed).
Revenue by category
The Group disaggregates revenue from contracts with customers between Net policy income, Repair income, Home Experts, HVAC
installations and Other as management believe this best depicts how the nature, amount, timing and uncertainty of the Group’s revenue
and cash flows are affected by economic factors. The following table outlines the principal activities from which the Group derives revenue
and how it is recognised:
Revenue stream
Nature and timing of satisfaction of performance obligations
Significant payment terms
Membership:
Net policy
income –
Intermediary
commissions
Includes commissions received for the obligation to sell policies, handle claims and
provide administration services for underwriters. The Group satisfies its obligation
to sell policies over time, recognising revenue as each policyholder is contracted on
behalf of the Group’s customers, the underwriters.
The transaction prices of the Group’s arrangements with underwriters are entirely
variable and measured based on the commission due to the Group for the number
of policies sold, net of a refund liability. This refund liability reflects management’s
best estimate of mid-term policy cancellations ensuring that a significant reversal of
revenue will not arise in the future (see note 3).
HomeServe receives
its commission from its
customer, the underwriter, in
line with the payment terms
of the underlying individual
policyholder which are
typically either billed and
paid upfront or over the term
of the contract.
Claims handling and administration service obligations are satisfied over the term of a
policy, which is typically 12 months. The portion of the total transaction price allocated
to these performance obligations is deferred, as a deferred income contract liability,
and recognised as revenue over the profile of claims throughout the policy term.
The determination of the amount of transaction price to allocate to claims handling
and administration services takes account of the expected numbers of claims and
the estimated cost of handling those claims, which are validated through historic
experience of actual costs, as well as incorporating an appropriate profit margin for the
service provided to the underwriter (see note 3).
Revenue associated with the commissions received for the obligation to sell policies is
allocated using the residual method at the point of policy inception or renewal.
Where the Group’s role on behalf of the underwriter is only as an intermediary in the
cash collection process, such amounts are not included in revenue. Consequently, net
policy income consists of only a component of the overall policy price, representing
the commission receivable for the services the Group provides to the underwriter,
stated net of sales related taxes.
Membership:
Net policy
income – Home
assistance
Includes arrangements whereby the Group contracts directly with the end user
to provide home assistance services (such as repair network access, emergency
assistance and non-urgent engineer visits). Revenue is recognised rateably over the life
of the member’s contract.
Billed and paid over the term
of the contract.
Membership:
Repair income
Includes repair services provided to third parties, including underwriters and insurance
companies, subject to separate contractual arrangements. Revenue is recognised over
time as each repair job is completed.
Billed and paid upon
completion of the job.
Home Experts –
Web and directory
Includes website subscriptions and directory advertising fees from contracted
members (tradespeople). For website subscriptions revenue is recognised evenly over
the contractual term, for directory membership fees revenue is recognised as each
directory is delivered throughout the contractual term.
Billed and paid over the term
of the contract.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 144
Notes to financial statements
Year ended 31 March 2021
2. Significant accounting policies (continued)
Other accounting policies (continued)
Revenue stream
Nature and timing of satisfaction of performance obligations
Home Experts –
Lead generation
Includes commissions received for the provision of job leads to trades. Revenue is
recognised at the point in time a lead is transferred.
HVAC
installations
Includes the provision of installation services at the point in time the installation is
complete.
Other
Principally includes services provided to customers who do not hold policies. Revenue
is recognised at the point in time the service is complete.
Significant payment terms
Either billed and paid as
leads are delivered or
deposits from customers
received in advance then
reduced as billed when leads
are delivered.
Billed and paid upon
completion of the
installation.
Billed and paid following the
performance of the services
provided.
As a result of the contracts which the Group enters into with its customers, the following assets and liabilities are recognised on the Group’s
balance sheet:
• Assets generated from the capitalisation of costs to obtain a contract
• Trade receivables (see financial instruments accounting policies below)
• Accrued income
• Deferred income.
Capitalisation of costs to obtain a contract
The incremental costs of obtaining a contract with the Group’s direct customers are recognised as an asset if the Group expects to recover
them. Primarily, such costs relate to fees payable to Affinity Partners or other third parties authorised to enter into new contracts on behalf of
a Group entity. Only fees which are directly related to acquiring contracts with the Group’s direct customers are capitalised as incremental
contract costs under IFRS 15.
Accrued and deferred income
Where payments made are greater than the revenue recognised at the period end date, the Group recognises a deferred income contract
liability for this difference. Where payments made are less than the revenue recognised at the period end date, the Group recognises an
accrued income contract asset for this difference.
Marketing expenses
Costs incurred in respect of marketing activity, including for example, direct mail and inbound/outbound telephone costs, which is
undertaken to acquire or renew a policy, are charged to the income statement in the period in which the related marketing campaign is
performed.
Marketing expenses also include payments made to Affinity Partners in recognition of their support for the Group’s selling and policy
renewal activities. The terms of their support and related payments are included in contractual agreements with each Affinity Partner.
Amounts incurred upon the sale and renewal of an individual policy by the Group, referred to as Affinity Partner Commissions, are
recognised as an operating expense when individual policies incept or renew. Commissions are payable to Affinity Partners only when the
Group has collected the premium due on behalf of the underwriter from the policyholder.
Operating profit
Operating profit is stated after charging or crediting all operating costs and incomes, but before investment income and finance costs.
Adjusting and exceptional items
The Group uses the following adjusted profitability performance measures:
• adjusted operating profit
• adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA)
• adjusted profit before tax
• adjusted profit attributable to equity holders of the parent
• adjusted basic and adjusted diluted earnings per share
The Group believes that the consistent presentation of the above adjusted measures provide additional useful information to users on
the underlying trends and comparable performance of the Group over time. The adjusted measures are used by HomeServe for internal
performance analysis and incentive compensation arrangements for employees. All the adjustments made to the IFRS measures are
considered exceptional and/or non-operational in nature. These terms are not defined terms under IFRS and may therefore not be
comparable with similarly titled profit measures reported by other companies. They are not intended to be a substitute for, or superior to,
IFRS measures.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 145
The term 'adjusted' refers to the relevant measure of profit or earnings being reported excluding the impact (pre and post-tax where
applicable) of the following items:
Amortisation of acquisition intangibles
Acquisition intangible assets are calculated using the estimated and discounted incremental cash flows resulting from the affinity
relationship or future policy renewals as appropriate, which will include the impact of the past actions of the former owners. These past
actions will include historic marketing and business development activity, including but not limited to, the staff and operating costs of the
business. In addition the specific construct of the policy terms and conditions and the current and expected future profitability to be derived
from the acquired business or asset is also a factor in determining the valuation of the acquisition intangible.
The on-going service and operating costs incurred by the Group in managing the acquired businesses or assets, including but not limited
to print, postage, telephony, claims costs and overheads are recognised as operating costs within these adjusted measures in the reporting
period in which they are incurred.
Accordingly, excluding the amortisation of acquisition intangibles from the adjusted performance measures reported by the Group in each
specific reporting period ensures that these measures only reflect the revenue attributable to, and costs incurred by, the Group in managing
and operating those businesses and assets at that time in each reporting period and do not include the impact of the historic costs of the
vendor or considerations of the future profits to be derived from the acquired business or assets.
Certain transaction related costs
Certain financial instruments which the Group becomes party to by virtue of its transactional activity (typically, but not limited to,
acquisitions and disposals) have the potential to create volatility that is not representative of the underlying performance of the business.
These include:
• Fair value movements on financial instruments generated from transaction related activity. Currently the Group’s portfolio of such
instruments includes contingent consideration arising on business combinations (see note 27), put options over the acquisition of non-
controlling interests (see note 22 & 23) and call options over both the acquisition of additional equity in associates and the sale of equity
in subsidiaries (see note 27);
• Unwinding of discount on contingent financial instruments (including options); and
• Charges associated with put options over non-controlling interests, which are expensed through the income statement over time to
reflect the requirement for the recipients to remain employed in the business at the payment date. The charges are subject to fair value
volatility associated with the non-controlling interest puts and are not representative of the ongoing cost of the recipient remaining in
the business.
Excluding these items from the Group’s adjusted metrics provides for a consistent measure of underlying profitability on which to assess the
Group’s performance both period on period and relative to its peers. Certain transaction related costs do not include deal fees, financing
charges on deferred consideration or the market rate salaries and bonuses of employees who hold non-controlling interest puts. All these
items are included within the Group’s adjusted performance measures.
Exceptional items
Exceptional items are those items that, in the judgement of the Directors, need to be disclosed separately by virtue of their nature, size or
incidence.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair
value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. The Group provides employees with
the ability to purchase shares through its One Plan scheme. Since February 2021, for every share purchased, employees will receive one
free matching share at the end of the vesting period. Prior to February 2021, for every two shares purchased, employees received one free
matching share at the end of the vesting period.
Fair values are measured utilising the Black-Scholes, Monte Carlo and Stochastic simulation models.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
For defined benefit retirement schemes, the cost of providing benefits is determined using the projected unit credit method, with actuarial
valuations being carried out at each balance sheet date. Actuarial gains and losses and the return on scheme assets (excluding interest) are
recognised in full in the period in which they occur. They are recognised outside the income statement and presented in the statement of
comprehensive income. Re-measurements recorded in the statement of comprehensive income are not recycled.
Past service costs are recognised in the income statement in the period of scheme amendment, curtailment or when the related
restructuring costs or termination benefits are recognised, if earlier. Net interest is calculated by applying a discount rate to the net defined
benefit liability or asset.
Any retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as reduced
by the fair value of scheme assets. Any asset resulting from the calculation is limited to past service costs, plus the present value of available
refunds and reductions in future contributions to the plan.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 146
Notes to financial statements
Year ended 31 March 2021
2. Significant accounting policies (continued)
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Any tax currently payable is based on taxable profit for the year along with a small number of provisions in relation to open tax positions. The
Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet
liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is
able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred
tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income or
directly to equity, in which case the deferred tax is also dealt with in other comprehensive income or within equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is
measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed in exchange for control
of the acquiree. Acquisition-related costs are recognised in the consolidated income statement, as incurred, in operating costs.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent or deferred consideration
arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values that qualify as measurement period
adjustments are adjusted against the cost of acquisition. All other subsequent changes in the fair value of contingent consideration
classified as an asset or liability are accounted for in accordance with relevant IFRSs and recognised immediately in the consolidated
income statement. Changes in the fair value of contingent consideration classified as equity are not recognised. Deferred consideration is
subsequently measured at amortised cost. Payments of contingent and deferred consideration are reported within cash flow from investing
activities in the Group statement of cash flows.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the
Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during
the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and
circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and
circumstances that existed as of the acquisition date and is subject to a maximum of one year.
Goodwill
Goodwill arising in a business combination is recognised at cost as an asset at the date control is acquired (the acquisition date). Goodwill
is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and
the fair value of the Group’s previously held equity interest in the acquiree, if any, over the net amounts of identifiable assets acquired and
liabilities assumed at the acquisition date. The interest of the non-controlling shareholders in the acquiree may initially be measured either at
fair value or at the non-controlling shareholders’ proportion of the net fair value of the identifiable assets acquired, liabilities and contingent
liabilities assumed. The choice of measurement basis is made on an acquisition-by-acquisition basis.
Goodwill is not amortised but is reviewed for impairment annually, or more frequently if there is an indication that it may be impaired.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units (CGUs) expected to benefit from
the synergies of the combination. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the unit pro rata on the
basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Goodwill arising on acquisitions before the date of transition to IFRSs has been retained at the previous UK GAAP amounts subject to being
tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included
in determining any subsequent profit or loss on disposal.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 147
Intangible assets
Acquisition intangible assets
Acquired access rights relate to the contractual agreements entered into with the former owners of businesses acquired as part of a
business combination; or where the former owners previously operated a business, and the Group has purchased specific access rights
from the former owners. These agreements set out the contractual terms of the Affinity Partnership and provide the contractual framework
within which the Group markets, sells and renews policies with the individual customers of the Affinity Partner. Acquired access rights are
recorded at fair value by using the estimated and discounted incremental future cash flows resulting from the relationship.
Acquired customer databases represent the value attributable to the portfolios of renewable policies that exist at the date of acquisition and
are acquired by the Group as part of a business combination; or where the former owners previously operated a business, and the Group
has purchased specific customer databases from the former owners. Acquired customer databases are recorded at fair value using the
estimated and discounted incremental future cash flows resulting from the future renewal of the portfolio of acquired policies over their
estimated residual lives.
Other acquired intangibles include acquired brands recorded at fair value using the relief from royalty valuation method and technology
assets recorded at fair value using a replacement cost approach.
Other intangible assets
Access rights arise from the contractual agreements with Affinity Partners which provide the contractual framework within which the Group
markets, sells and renews policies with the individual customers of the Affinity Partner. Access rights are valued at the discounted present
value of the contractually committed payments, where such payments are not related to the success or otherwise of activity under the
contractual agreements.
Trademarks represent costs incurred to legally protect the established brand names of the Group. Trademarks are stated at cost.
Customer databases represent the value attributable to the portfolios of renewable policies that have been created by our Affinity Partners
through their own sales and marketing activity and subsequently purchased by the Group. Such databases are recorded at their fair value
based on the amount paid to the Affinity Partner.
Computer software and the related licences are stated at cost.
Amortisation
Amortisation is charged so as to write off the cost of intangible assets over their estimated useful lives, using the straight-line method, on the
following bases:
Acquired access rights
Acquired customer databases
Other acquired intangibles
3 - 20 years
3 - 15 years
8 - 11 years
Access rights and trademarks
Customer databases
Computer software
up to a maximum of 20 years
3 - 10 years
3 - 10 years
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation.
Depreciation is charged so as to write off the cost of assets, other than land, over their estimated useful lives, using the straight-line method,
on the following bases:
Buildings and leasehold improvements
Furniture, fixtures and equipment
Computer equipment
Motor vehicles
25 - 50 years
5 - 7 years
3 - 7 years
3 years (with 25% residual value)
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the assets for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is
reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset or CGU in prior years. A reversal of an impairment loss is recognised as income
immediately.
Leases
The Group assesses whether a contract is, or contains, a lease, at inception of the contract. The Group recognises a right-of-use asset and
a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases
with a lease term of 12 months or less) and leases of low value assets (where the value of the asset is below £4k). For these leases, the Group
recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
148 Financial statements
Notes to financial statements
Notes to financial statements
Year ended 31 March 2021
2. Significant accounting policies (continued)
Leases (continued)
Lease liabilities
Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses a lease specific incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
•
•
fixed service costs associated with the Group’s property and vehicle lease portfolios (as the Group has elected to apply the expedient
available under paragraph 15 of IFRS 16 not to separate non-lease components, and instead account for any lease and associated non-
lease components as a single arrangement);
fixed lease payments (including in substance fixed payments), less any lease incentives;
the amount expected to be payable by the lessee under residual value guarantees;
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
•
•
• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
Lease liabilities are subsequently measured at amortised cost using the effective interest method by increasing the carrying amount to
reflect interest on the lease liability and by reducing the carrying amount to reflect the lease payments made. The Group re-measures the
lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
•
the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is
re-measured by discounting the revised lease payments using a revised discount rate;
•
the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in
which case the lease liability is re-measured by discounting the revised lease payments using the initial discount rate (unless the change
in lease payments is due to a change in a floating interest rate, in which case a revised discount rate is used);
• a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is re-
measured by discounting the revised lease payments using a revised discount rate.
The Group did not make any such adjustments during the periods presented.
Right-of-use assets
Right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at, or before, the
commencement date and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment
losses. Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. Depreciation
begins at the commencement date of the lease.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore
the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS
37. The costs are included in the related right-of-use asset.
Variable rents
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset.
The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and
are included in operating costs in the income statement.
Interests in equity accounted investments
The results and assets and liabilities of associates and joint ventures are incorporated into these financial statements using the equity
method of accounting. Under the equity method, investments are initially recognised in the consolidated balance sheet at cost and adjusted
thereafter to recognise the Group’s share of the profit and loss and other comprehensive income of the investee. If the Group’s share of the
profit or loss exceeds the Group’s interest in the investee, the Group discontinues recognising its share of further losses. Additional losses are
recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee.
On acquisition of equity accounted investment interests, any excess of the cost of the investment over the Group’s share of the net fair value
of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included in the carrying amount of the investment.
When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36
Impairment of Assets as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognised
forms part of the carrying amount of the investment.
The Group discontinues the use of the equity method of accounting if the investment becomes a subsidiary. Upon becoming a
subsidiary, the Group accounts for the entity in accordance with the business combinations policy above. Any fair value gain or loss on re-
measurement of an equity accounted investee on acquisition of control is taken to the profit and loss account at the date of acquisition.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an
outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions
are discounted to present value, using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the liability. The amortisation of the discount is recognised as a finance cost.
HomeServe plc Annual Report & Accounts 2021 Financial statements
Notes to financial statements
149
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist
where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic
benefits expected to be received under it.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual
provisions of the instrument. The classification depends on the nature and purpose of the financial assets or liabilities and is determined at
the time of initial recognition.
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, Fair Value through Other Comprehensive
Income (FVTOCI) or Fair Value through Profit or Loss (FVTPL). The classification is based on two criteria:
•
• whether the instruments’ contractual cash flows represent “Solely Payments of Principal and Interest” on the principal amount
the Group’s business model for managing the assets; and
outstanding (the “SPPI criterion”).
Trade receivables
Trade receivables do not carry any interest and are stated at amortised cost, reduced by appropriate allowances for estimated irrecoverable
amounts, as the business model of the Group is to collect contractual cash flows and the debt meets the SPPI criterion. They are
recognised when the Group’s right to consideration is only conditional on the passage of time. Allowances incorporate an expectation of
life-time credit losses from initial recognition and are determined using an expected credit loss approach.
Cash and cash equivalents
Cash and cash equivalents are held at amortised cost and comprise cash in hand, demand deposits and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Cash and
cash equivalents in the balance sheet are presented net of outstanding bank overdrafts where the Group has a legally enforceable right of
set off and is able to demonstrate the intention to settle on a net basis. All other overdrafts are presented as liabilities within bank and other
loans. Cash and cash equivalents may include amounts which are subject to contractual restrictions and not available for general use by the
Group.
For the purpose of the Group Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of
all outstanding bank overdrafts.
Other investments
At each balance sheet date the Group conducts a fair value assessment of its investments, the difference between the fair value and
carrying value is charged or credited to the Statement of Comprehensive Income accordingly and held in the investment revaluation
reserve.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Borrowings
Interest-bearing loans and overdrafts are stated at amortised cost and are recorded at the notional amount of the proceeds received, net
of direct issue costs. Interest-bearing loans are subsequently measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis. For the Group’s floating Revolving Credit Facilities (RCFs), the Group has started discussions
with respective counterparties to amend the agreements to reflect the cessation of LIBOR. For reference to GBP and USD LIBOR, the Group
will begin a dialogue with counterparties in FY22 to propose amendments to move from GBP/USD LIBOR to SONIA and SOFR respectively.
Trade payables
Trade payables are non interest-bearing and are stated at amortised cost.
Equity instruments
Equity instruments issued by the Company are recorded at the notional amount of the proceeds received, net of direct issue costs.
‘Put’ options over the equity of subsidiary companies
The potential cash payments related to put options issued by the Group over the equity of subsidiary companies are accounted for as
financial liabilities. The amounts that may become payable under the option on exercise are initially recognised at the present value of the
expected gross obligation with the corresponding entry being recognised in retained earnings. Such options are subsequently measured
at amortised cost, using the effective interest rate method, in order to accrete the liability up to the amount payable under the option at
the date at which it first becomes exercisable. The charge arising is recorded as a financing cost. The present value of the expected gross
obligation is reassessed at the end of each reporting period and any changes are recorded in the income statement. In the event that an
option expires unexercised, the liability is derecognised with a corresponding adjustment to retained earnings.
Other ‘put’ and ‘call’ options
Other put and call options are recognised at fair value with any associated benefit being recognised directly in the income statement.
FINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 150
Notes to financial statements
Year ended 31 March 2021
3. Accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 2, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results
may differ from these estimates.
Where sensitivity analyses have been prepared below, management determine reasonably possible increases/decreases to primary inputs
at appropriate thresholds to illustrate the potential impact on profit in the year. Currently these sensitivities reflect the potential increased
volatility and uncertainty of forward looking judgements and estimates when operating during the COVID pandemic, particularly in the
short-term.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods. The nature of the principal assumptions underlying sources of estimation uncertainty and other
areas of focus remain consistent with the prior year.
Critical accounting judgements
Present ownership interest
Acquisition transactions are reviewed to determine whether they give the Group a present ownership interest when subsidiaries are
acquired with non-controlling interests subject to put options that are mandatorily exercisable at a final exercise date. Factors taken into
account include considering whether there are any restrictions on voting rights, dividend rights and decision making for the non-controlling
interests. Furthermore consideration is given to the extent to which non-controlling interests are able to participate in any increase in value
over the period to the exercise date. On the basis that there are no restrictions on voting rights, dividend rights or decision making and that
non-controlling interests are able to participate in any increases in value over the period to the exercise date, the Directors’ judgement is that
the Group does not have a present ownership interest over the remaining 21% equity interest of eLocal Holdings LLC (see note 30).
Key sources of estimation uncertainty
Claims handling obligations
Regarding revenue recognition, a proportion of revenue is deferred to cover the Group’s future obligations in respect of handling future
claims arising on those policies that are on risk at the year end.
The key sources of estimation uncertainty in determining an appropriate proportion of revenue to defer are the assumptions made with
regards to claims frequency and the estimated cost of handling a claim. The Group uses historical experience of claim volumes and forecast
activity levels to estimate these assumptions. The total amount of revenue deferred at 31 March 2021 in respect of the Group’s future
claim handing obligations is £40.7m (FY20: £38.0m). If either of these assumptions were individually 15% higher or lower, which reflects
management’s judgement based on historical experience, the impact to the profit in the year would be £6.1m (FY20: £5.7m).
Impairment of goodwill and acquisition intangible assets
The annual impairment assessment in respect of goodwill and acquisition intangibles requires estimates of the value in use (or fair value less
costs to sell) of the CGU to which goodwill and acquisition intangibles have been allocated. CGUs are aligned to the lines of business within
each geographic territory in which the Group operates. As a result, estimates of future cash flows are required, together with an appropriate
discount factor for the purpose of determining the present value of those cash flows. Where significant investment is planned in a CGU
during the typical three year plan period approved by the Directors, a period of actual cash flows deviating from the standard period may be
deemed more appropriate for purposes of impairment testing.
The carrying value of goodwill is £564.3m (FY20: £509.9m). The carrying value of acquisition intangibles is £253.2m (FY20: £292.3m).
Following the FY21 annual impairment review, no impairment charges were recorded (FY20: £0.5m and £0.7m against the goodwill and
acquisition intangibles associated with the acquisition of Somgas Hogar S.L). See notes 13 and 14.
As set out in note 13, changes in respect of commercial outcomes around sales volumes, prices, margins and discount rates can impact the
recoverable value.
All businesses have modelled scenarios with varying levels of severity as a result of the COVID pandemic, considering different timelines for
emerging from lockdowns and the resultant impacts on customer, employee and supplier mobility and how this impacts profits and cash
flows. In addition, all businesses have also considered potential upside factors such as increased demand as situations ease. The analyses,
which management believe are based on reasonably plausible assumptions, do not result in the carrying amount of goodwill exceeding the
recoverable amount.
At 31 March 2021 all CGUs have recoverable amounts that exceed the carrying value of goodwill by more than 40%, with the exception
of the Habitissimo CGU which exceeds the carrying value of the attributable goodwill by 14% (FY20: all CGUs by more than 40%). No
reasonably possible change in assumptions would result in a material impairment in the Habitissimo CGU.
With respect to Checkatrade, although the recoverable amount of the CGU exceeds the carrying value by 75%, the business model sees us
move towards profitability in FY23 with substantial growth thereafter and, as a result, we have applied a number of sensitivities to understand
the impact of reasonably possible changes to future cash flows and discount rates over the period. With respect to changes in cash flows,
a reduction in the year 3 modelled cash flows of 40%, reflecting management’s judgement of the highest level of reasonably possible
potential uncertainty which could arise as a result of COVID, would result in an impairment of £12.4m. No reasonably possible changes in
discount rate resulted in an impairment.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 151
Retirement benefit obligations
In the UK, the Group participates in a defined benefit scheme, the Water Companies Pension Scheme, which is closed to new members.
This is a sectionalised scheme and the Group participates in the HomeServe plc Section of the Scheme. Although the HomeServe plc
Section is in a net £8.3m (FY20: £10.3m) surplus position, the position is subject to actuarial risks including, but not limited to: longevity risk,
interest risk and inflationary risk. Sensitivities covering life expectancy, discount rates and inflation are included in note 33.
Other areas of focus
Whilst not considered to be critical accounting judgements or key sources of estimation uncertainty, the following are areas of focus for
management.
Valuation of acquisition intangible assets
When acting as the acquirer in a business combination, the Group is required to recognise separately from goodwill all intangibles that are
either separable or arise from contractual or other legal rights. The Group’s acquired access rights, acquired customer databases and other
acquired intangibles are principally valued using the multiple period excess earnings method. This valuation approach can include a variety
of judgemental assumptions including, but not limited to, estimates of expected future cash flows, retention or attrition rates and discount
rates.
In FY21 the Group identified intangible assets associated with business combinations totalling £28.6m (FY20: £80.5m). If the various
judgements the Group takes in valuing these assets deviated such that the total acquired fair value of FY21 acquisition intangibles was 15%
different to the recorded value, the impact of the variance would be recorded against goodwill in the balance sheet and would unwind
through the income statement via the revised carrying value of the intangibles, over their useful lives. Based on an average useful economic
life of 6.8 years for in-year acquired intangibles, this would cause a per annum impact of +/- £0.6m to the income statement (FY20: average
useful economic life of 9.5 years, +/- £1.3m).
Valuation of put options over non-controlling interests
On acquisition of a subsidiary the Group records any associated put options over non-controlling interests at the expected gross present
value of the obligations. Subsequent changes in the present value of the expected gross obligation are recorded in the income statement
at the end of each reporting period. Determining the value of the obligations, both at initial recognition and subsequent reporting dates
requires that management make assumptions and utilise techniques that are key sources of estimation uncertainties. Key assumptions
include using Monte Carlo simulations, to determine the expected performance of the acquired business over a period of up to five years
as well as the probability of a range of actions available to the non-controlling interests regarding the timing of exercise. Initial estimates of
expected performance are made by the Directors responsible for completing the acquisition and form a key component of the financial
due diligence that takes place prior to completion. Subsequent measurement is based on the Directors’ appraisal of the acquired business’
performance in the post-acquisition period with any required adjustments to the amount payable recognised in the income statement.
The Monte Carlo simulation utilised by the Group to value its obligations contains a number of variable inputs, including estimates
of future business performance (revenue, EBITDA and net debt projections), discount rates as well as certain volatility and correlation
assumptions. The most consequential of these variables to the valuation of the instruments is the estimates of future business performance.
Consequently, sensitivities of the carrying value to reasonably possible ‘downside’ and ‘upside’ forecast scenarios were performed. In the
upside forecast scenario the carrying value of the obligations at 31 March 2021 increased from the amount recorded (£34.3m, see note 22
and 23) by £1.6m. In the downside forecast scenario the carrying value of the obligations at 31 March 2021 decreased by £2.1m.
Policy cancellations
Policies may be cancelled by the policyholder part way through the contractual term, which will affect the economic benefits that flow
to the Group. Consequently, in accordance with IFRS 15, a refund liability is recognised to ensure that the related revenue is appropriately
constrained at the point that the policy incepts in order to ensure that it is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur once the uncertainty associated with the possibility of cancellation is resolved. The total
amount of revenue deferred at 31 March 2021 in respect of potential future cancellations is £23.6m (FY20: £24.3m).
The Group uses historical experience to ensure revenue is appropriately constrained analysing expected mid-term cancellation percentages
and the period of cover remaining on the policy at the point of cancellation. The most significant estimation uncertainty within this
judgement is the mid-term cancellation percentage (or, inversely, the rate at which policyholders are retained).
In the most recent ten-year period the Group retention rate has not deteriorated from its current level, 83%, by more than 2 ppts, making it
highly probable that a significant reversal of cumulative revenue will not occur. Consequently the ‘reasonably probable’ sensitivity analysis
has focused on the ‘upside’ scenario only. Were cancellation rates to be 15% lower, which reflects management’s judgement based on
historical experience, the impact to profit in the year would be £3.5m (FY20: £3.6m).
4. Segmental information and revenue from contracts with customers
Segment revenues and results
Since March 2021, underneath the Group’s revised overarching three-division structure (being: Membership & HVAC – North America,
Membership & HVAC – EMEA and Home Experts), the Group’s IFRS 8 reportable segments are principally geographic in nature as these are
the components which the Group’s chief operating decision maker (CODM), the Chief Executive, regularly reviews internal reports about
how to allocate resources to the segments and to assess their performance.
The two ‘Membership & HVAC’ divisions incorporate the Group’s net policy, repair, HVAC installations and other revenue streams. The
Membership & HVAC – North America division represents a separate segment based on the IFRS 8 criteria outlined above. The Membership
& HVAC – EMEA division splits into four geographic segments: UK, France, Spain and New Markets (including the Group’s Membership &
HVAC international development initiatives, its Japanese joint venture and its former Italian associate which was disposed of on 1 August
2019, see notes 7 and 18).
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 152
Notes to financial statements
Year ended 31 March 2021
4. Segmental information and revenue from contracts with customers (continued)
Segment revenues and results (continued)
The Home Experts division, which represented one IFRS 8 segment in FY20, splits into three geographic IFRS 8 segments in FY21 with
the inclusion of the first full year of eLocal results. The results of Home Experts – UK and Home Experts – North America are both
separately assessed by the CODM. Consequently, the FY21 IFRS 8 segments of the Home Experts division are: UK (including the results
of Checkatrade), North America (including the results of eLocal) and Other (including the results of Habitissimo (Spain), Preventivi (Italy)
(since acquisition on 30 December 2020, see note 16) and Home Experts France (until the point of disposal on 15 May 2020, see note 16)).
Comparative disclosures have been restated reflecting the division of Home Experts into three IFRS 8 segments that became effective in
March 2021.
Segment operating profit/(loss) represents the result of each segment including allocating costs associated with head office and shared
functions, but without allocating investment income, finance costs and tax. This is the measure reported to the CODM for the purposes of
resource allocation and assessment of segment performance.
The accounting policies of the operating segments are the same as those described in note 2. Group cost allocations are deducted
in arriving at segmental operating profit. Inter-segment revenue relates to transactions with other Group companies, removed on
consolidation, and principally comprises royalty and other similar charges charged at prevailing market prices. Disaggregation of revenue by
both line of business and geography are disclosed below. Management believes that these are the most relevant categories that depict how
the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The line of business analysis also
illustrates the Group’s revenue by major products and services.
Home Experts
North
America
£m
Other
£m
Total
£m
Membership & HVAC
North
America
£m
Membership & HVAC – EMEA
UK
£m
France
£m
Spain
£m
New
Markets
£m
388.1
233.2
113.0
57.1
57.9
—
3.3
80.3
12.1
—
13.3
0.3
16.0
—
3.3
48.9
131.2
15.6
—
—
506.4
338.9
132.6
195.7
—
(8.7)
—
—
506.4
330.2
132.6
195.7
—
—
—
—
—
—
—
—
2021
Revenue
Net policy income
Repair income
HVAC installations
Home Experts
Other
Total revenue
Inter-segment
External revenue
Result
UK
£m
—
—
—
38.9
—
38.9
—
—
—
—
91.3
—
91.3
—
38.9
91.3
105.0
—
(2.0)
(20.8)
82.2
72.5
(87.8)
—
(3.2)
(18.5)
35.6
—
—
(7.2)
28.4
17.7
(0.6)
—
(2.4)
14.7
(6.3)
(3.7)
—
—
(10.0)
(16.0)
—
—
(4.6)
(20.6)
13.2
—
(3.1)
(6.2)
3.9
Adjusted operating profit/(loss) 1
Exceptional items
Certain transaction related costs
Amortisation of acquisition intangibles
Operating profit/(loss)
Investment income
Finance costs
Profit before tax
Tax
Profit for the year
—
—
—
9.6
—
9.6
—
9.6
(7.4)
(0.3)
—
(0.6)
(8.3)
783.2
268.9
101.6
139.8
19.9
1,313.4
(8.7)
1,304.7
214.3
(92.4)
(5.1)
(45.0)
71.8
0.4
(25.0)
47.2
(15.4)
31.8
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021
153
Membership & HVAC
Membership & HVAC – EMEA
Home Experts
North
America
£m
354.9
30.6
42.4
—
1.6
429.5
—
429.5
85.4
—
(17.8)
67.6
2020
Revenue
Net policy income
Repair income
HVAC installations
Home Experts
Other
Total revenue
Inter-segment
External revenue
Result
Adjusted operating profit/(loss) 1
Exceptional items
Amortisation of acquisition intangibles
Operating profit/(loss)
Investment income
Finance costs
Profit before tax
Tax
Profit for the year
UK
£m
France
£m
Spain
£m
New
Markets
£m
249.4
104.5
89.5
21.2
—
12.8
372.9
(7.8)
365.1
81.0
(15.0)
(3.2)
62.8
49.2
94.4
10.5
—
—
0.4
6.8
—
0.1
111.8
154.1
—
—
111.8
154.1
—
—
—
—
—
—
—
—
33.8
—
(6.9)
26.9
20.1
(4.7)
—
(0.5)
19.6
3.8
—
(0.9)
UK
£m
—
—
—
38.5
—
38.5
—
38.5
(10.4)
—
(4.6)
(15.0)
North
America
£m
Other
£m
—
—
—
—
—
—
22.1
11.2
—
—
Total
£m
758.0
214.9
80.9
71.8
14.5
22.1
11.2
1,140.1
—
—
(7.8)
22.1
11.2
1,132.3
1.8
—
(2.0)
(0.2)
(5.3)
3.6
(0.5)
(2.2)
201.7
(7.6)
(35.5)
158.6
0.5
(21.2)
137.9
(32.1)
105.8
1 Adjusted operating profit is defined in the Glossary to the Annual Report & Accounts see page 209.
Net policy income includes £52.7m of home assistance revenue (FY20: £52.6m) where the Group contracts directly with the end user and
not through an underwriter. £28.8m (FY20: £35.3m) of the home assistance revenue relates to the Group’s Spanish Membership business.
Segment information
Membership & HVAC
North America
Membership & HVAC – EMEA
UK
France
Spain
New Markets
Home Experts
UK
North America
Other
Inter-segment
Total
Assets
Liabilities
Non-current asset
additions
Depreciation, amortisation
and impairment
2021
£m
2020
£m
2021
£m
2020
£m
2021
£m
2020 1
£m
2021
£m
2020
£m
586.7
557.1
691.2
683.6
24.0
29.0
41.0
35.3
1,092.8
1,183.3
262.0
176.6
0.8
90.3
122.3
21.3
247.3
143.8
0.6
56.0
135.9
18.2
669.5
183.4
142.8
35.9
28.1
18.3
9.9
(575.6)
(559.2)
(575.6)
1,777.2
1,783.0
1,203.5
653.2
163.3
105.5
31.9
21.2
23.2
14.0
(559.2)
1,136.7
19.2
19.0
9.8
—
9.3
0.1
2.7
—
29.8
15.2
9.4
—
11.9
—
1.8
—
116.1
17.1
16.2
—
9.1
6.7
2.1
—
47.5
13.6
17.4
—
6.9
2.2
1.7
—
84.1
97.1
208.3
124.6
1 Prior year comparatives have been updated for the inclusion of £14.7m non-current asset additions to right-of-use assets.
All assets and liabilities including inter-segment loans and trading balances are allocated to reportable segments.
In FY21 these figures include £84.7m (FY20: £14.3m in relation to HomeServe Labs) of impairment charges booked in the Membership &
HVAC – EMEA UK segment in relation to eServe and other intangible software assets (see note 7) and £0.1m of non-exceptional impairment
charges booked in the Home Experts UK segment in relation to contract costs. In FY20 £1.2m of impairment charges were also booked in
the Membership & HVAC – EMEA Spain segment in relation to the acquisition of Somgas Hogar S.L. (see notes 13 & 14).
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 154
Notes to financial statements
Year ended 31 March 2021
4. Segmental information and revenue from contracts with customers (continued)
Information about major customers
During the periods presented, three underwriters were customers of the Group that individually accounted for over 10% of the Group’s
revenue:
Customer 1 - UK
Customer 2 - North America
Customer 3 - North America
Other customers individually representing below 10% of Group revenue
2021
%
23.5
16.1
11.8
48.6
2020
%
28.9
16.7
12.9
41.5
100.0
100.0
Geographical information
The Group operates in four principal geographical areas as disclosed below.
The Group’s revenue from external customers (by customer domicile) and information about its segment assets (non-current assets
excluding deferred tax, retirement benefit assets and financial instruments) by geographical location are detailed below:
USA
UK
Spain
France
Other
Revenue from external
customers
Non-current assets
2021
£m
596.0
368.5
199.1
132.6
8.5
2020
£m
449.9
403.7
159.3
111.8
7.6
2021
£m
399.1
354.9
100.6
181.0
19.3
2020
£m
426.5
457.2
65.3
167.0
16.2
1,304.7
1,132.3
1,054.9
1,132.2
The other category in the table above principally includes the Group’s revenue and non-current assets from Canada, Latin America and
Continental European countries, excluding Spain and France.
Transaction price allocated to remaining performance obligations
The total transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) on the Group's multi-year
arrangements with underwriters to sell policies, is £62.2m (FY20: £51.7m), related to all ancillary obligations delivered after any given policy is
sold. The obligations associated with the outstanding transaction price are expected to be fulfilled, and revenue fully recognised, within the
next 12 months.
All other contracts with customers have an original expected duration of one year or less. No consideration from these contracts has
been excluded from the transaction price. Applying the practical expedient of paragraph 121 of IFRS 15, information about remaining
performance obligations on these contracts has not been disclosed.
Contract balances
An analysis of the Group’s contract balances is as follows:
Current assets
Amounts receivable for the provision of services (see note 20)
Accrued income
Current liabilities
Deferred income
2021
£m
2020
£m
424.0
18.1
427.3
16.9
62.2
51.7
All contract balances are classified as current. Accrued income contract assets primarily relate to services performed for customers in our
Spanish claims operations in advance of payment being received, or falling due. Accrued income contract assets are transferred to trade
receivables when the right to consideration becomes unconditional. Deferred income contract liabilities principally relate to advance
consideration received from customers, for which revenue is recognised as the associated performance obligation is satisfied. Significant
deferred income contract liabilities are recorded across the Group in the Membership and Home Experts businesses.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 Significant changes in accrued and deferred income balances during the year were as follows:
At 1 April 2019
Transfers to receivables
Revenue recognised from the opening balance
Revenue deferred not yet earned
Revenue earned not yet due
Business combinations
Foreign exchange
At 1 April 2020
Transfers to receivables
Revenue recognised from the opening balance
Revenue deferred not yet earned
Revenue earned not yet due
Business combinations
Foreign exchange
At 31 March 2021
155
Accrued
Income
£m
15.1
(14.6)
—
—
16.1
—
0.3
16.9
(14.6)
—
—
16.3
—
(0.5)
18.1
Deferred
Income
£m
49.3
—
(50.1)
47.5
—
3.7
1.3
51.7
—
(44.9)
54.6
—
4.0
(3.2)
62.2
Revenue deferred not yet earned is presented net of amounts created and released within the same reporting period. Revenue recognised
in 2021 and 2020 in relation to performance obligations satisfied (or partially satisfied) in previous periods was immaterial.
Contract costs
At 1 April 2019
Additions
Disposals
Amortisation
Impairment
Foreign exchange
At 1 April 2020
Additions
Amortisation
Impairment
Foreign exchange
At 31 March 2021
£m
27.5
2.3
(1.6)
(11.8)
(0.1)
0.5
16.8
0.6
(9.0)
(0.1)
(0.1)
8.2
Contract costs primarily represent the value attributable to the portfolio of renewable customers created by Affinity Partners through their
own sales and marketing activity, subsequently purchased by the Group. Where these capitalised commission costs are incremental to the
cost of obtaining the contract with the Group's direct customer they are capitalised under IFRS 15. Management anticipate these costs to be
recoverable over the expected life of the associated customer relationship, over which they will be amortised.
Applying the practical expedient in paragraph 94 of IFRS 15, the Group recognises the incremental cost of obtaining contracts as an
expense when incurred if the amortisation period of the assets that the Group otherwise would have recognised is one year or less.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
156
Notes to financial statements
Year ended 31 March 2021
5. Profit for the year
Profit for the year has been arrived at after charging/(crediting):
Included in operating costs:
Staff remuneration
Cost of inventories recognised as an expense
Depreciation of right-of-use assets
Depreciation of property, plant and equipment
Amortisation of acquisition intangible assets
Amortisation of other intangible assets
Amortisation of contract costs
Loss/(gain) on disposal of property, plant and equipment, intangibles and contract costs
Loss on disposal of associate
Loss on disposal of subsidiary
Net amounts written off on trade receivables and contract assets (see note 20)
Impairment of goodwill, acquired intangibles and contract costs
Exceptional items (see note 7)
Expenses relating to variable lease payments not included in the measurement of lease liabilities
Expenses relating to leases of low value assets, excluding short-term leases of low value assets
Expenses relating to short-term leases
The analysis of auditor’s remuneration is as follows:
Fees payable to the Company’s auditor for the audit of the Company’s annual financial statements
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Audit-related assurance services
Total non-audit fees
Total auditor’s remuneration
2021
£m
2020
£m
389.1
339.2
25.2
15.2
9.9
45.0
44.4
9.0
1.1
2.1
0.1
2.1
0.1
92.4
1.4
0.4
0.7
2021
£'000
202
1,137
1,339
66
66
24.2
14.2
9.3
35.5
38.3
11.8
(0.8)
—
—
4.1
1.2
7.6
1.9
0.1
0.9
2020
£'000
153
1,161
1,314
55
55
1,405
1,369
Audit related assurance services are in respect of the review of the interim financial information and regulatory legal dividend reporting
requirements in France.
Fees payable to Deloitte LLP and their member firms for non-audit services to the Company are not required to be disclosed because the
consolidated financial statements are required to disclose such fees on a consolidated basis.
A description of the work of the Audit and Risk Committee is set out in the Corporate Governance report and includes an explanation of
how auditor objectivity and independence are safeguarded when non-audit services are provided by the auditor.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 6. Staff remuneration
The average monthly number of employees (including Executive Directors) was:
UK (including Head Office)
Continental Europe
North America
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs (see note 33)
Other long-term benefits
157
2021
number
3,068
2,271
2,108
7,447
2020
number
3,397
1,821
1,614
6,832
2021
£m
2020
£m
337.7
40.9
7.7
2.8
389.1
294.2
36.9
7.1
1.0
339.2
Other long-term benefits relate to costs accrued in association with options held by employees of eLocal Holdings LLC to put their non-
controlling interest equity to the Group.
The Company only staff numbers and remuneration amounts for HomeServe plc are disclosed in note 37 to the parent company financial
statements.
7. Adjusting and exceptional items
Adjusting items in addition to amortisation of acquired intangibles of £45.0m (FY20: £35.5m), comprised the following:
Costs of put options on non-controlling interests accrued over time
Fair value movements on option obligations and contingent consideration
Certain transaction related costs included within operating costs
Unwinding of discount on option obligations and contingent consideration
Certain transaction related costs included within finance costs
Total certain transaction related costs included in profit before tax
Net taxation on certain transaction related costs
Total certain transaction related costs after tax
2021
£m
2.8
2.3
5.1
1.6
1.6
6.7
(1.7)
5.0
2020
£m
—
—
—
—
—
—
—
—
In FY20 charges meeting the definition of certain transaction related costs totalled £0.2m and were included in adjusted profit due to their
insignificant size. As such no comparative charges have been reclassified.
Exceptional items, booked to operating costs, comprised the following:
Impairment charges and associated costs
Restructuring costs
Gain on acquisition of subsidiary non-controlling interests
Gain on disposal of investment in associate
Exceptional items included within operating profit before tax
Net taxation on exceptional items
Net exceptional items after tax
2021
£m
86.9
5.5
—
—
92.4
(17.6)
74.8
2020
£m
14.3
0.7
(3.6)
(3.8)
7.6
(2.0)
5.6
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
158
Notes to financial statements
Year ended 31 March 2021
7. Adjusting and exceptional items (continued)
Year ended 31 March 2021
Impairment and associated charges
The Group incurred exceptional impairment charges of £82.6m due to the full write down of the UK’s ‘eServe’ CRM system and recognised
£2.2m of exceptional provisions related to onerous contracts associated with the eServe system. During the second half of FY21 additional
capability issues came to light as more policies were introduced onto the system, meaning that the duration of the parallel run period
alongside the legacy system would need to be extended. Following an extensive review of system capability and robustness and the
ongoing operational needs of the business, the difficult decision was taken to revert the minority of customers on this platform back to the
existing Ensura CRM system, which is the proven system of record in North America. Following a period of decommissioning, eServe will
be replaced by a flexible, cloud-based solution. Current planning suggests this will be a Salesforce solution, similar to that implemented
successfully in France and which is planned for implementation in North America. This change results in an impairment charge being
recognised for the asset’s full carrying amount. Impairment and associated charges related to eServe have been classified as exceptional in
the consolidated income statement due to their size, nature and incidence.
Additionally, as part of the refocusing exercise discussed under restructuring costs below, additional impairment charges of £2.1m were
recorded in relation to other intangible software assets bringing their carrying values to £nil. The assets in question were built to allow UK
Membership jobs to be deployed to smaller trades via an app. However, the expected benefits associated with its deployment have not
been realised and therefore the functionality will not be used going forward. Aggregate costs of the refocusing exercise have been classified
as exceptional in the consolidated income statement due to their size, nature and incidence.
Restructuring costs
As well as looking for new opportunities, the Group frequently reviews its existing activity and considers whether there is anything that it
should stop doing. During the year, significant charges have been incurred as part of a refocusing exercise in two main areas. Firstly, having
reviewed international development opportunities and considered where capital allocated to this activity would create the most value for
shareholders, it was agreed that adopting a ‘near neighbour’ strategy, focusing on adjacent territories of our existing businesses, such as
Canada, Belgium and Portugal, was the optimum way to proceed. Development of these opportunities will be run by the management
teams of our existing businesses and, as a result, the central International Business Development team has been streamlined, resulting in an
exceptional cost of £3.7m. Secondly, as part of this refocusing, additional redundancy charges of £1.8m were recorded as the Group seeks
to refocus it's corporate functions and migrate back to a more federated operating model. Aggregate costs of the refocusing exercise have
been classified as exceptional in the consolidated income statement due to their size, nature and incidence.
Year ended 31 March 2020
Acquisition of subsidiary non-controlling interests
On 18 June 2019 HomeServe International Limited, a Group company, executed its call option (written on 27 January 2017, the point at
which it acquired a 70% controlling interest in Habitissimo S.L.), to acquire the outstanding 30% non-controlling interests in Habitissimo S.L.
for cash consideration of €8.6m (£7.7m). The transaction increased HomeServe International Limited’s interest in Habitissimo S.L. to 100% of
the issued share capital and did not give rise to a change in control.
The transaction resulted in a gain in the consolidated income statement of £3.6m. This represents the difference between the consideration
paid and the value of the option liability, being the potential cash payment of the non-controlling interests’ corresponding put option to
sell the remaining 30% of their shareholding, held on the balance sheet immediately prior to the transaction, net of directly attributable
transaction costs. The gain has been classified as exceptional in the consolidated income statement due to its size, nature and incidence.
Disposal of interest in associate
See note 18.
Impairment and restructuring charges associated with HomeServe Labs
Consumers and insurance partners were slower than expected to adopt smart leak detection technology. Following the Group’s annual
budgeting process and subsequent updates in light of the COVID pandemic, HomeServe completed an impairment review of the Group’s
LeakBot assets, concluding that the net assets of the business were impaired, and incurred a £15.0m exceptional charge. This conclusion
was reached based on a number of factors affecting expected future cash flows including commercial traction, access to investment and
the pace of technology change. Of the £15.0m, £12.9m related to the impairment of development assets for the LeakBot device, £1.4m
related to an inventory provision and £0.7m related to a restructuring provision.
8. Investment income
Interest on bank deposits
Other interest
2021
£m
0.1
0.3
0.4
2020
£m
0.5
—
0.5
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 9. Finance costs
Interest on bank and other loans
Interest on lease liabilities
Unwinding of discount on deferred consideration
Unwinding of discount on contingent consideration
Unwinding of discount on obligations under put options
Other interest
Exchange movements
10. Taxation
Current tax
Current year charge
Adjustments in respect of prior years
Total current tax charge
Deferred tax (credit)/charge
Total tax charge
159
2020
£m
17.7
1.5
0.8
0.2
0.5
—
0.5
21.2
2020
£m
33.7
(1.8)
31.9
0.2
32.1
2021
£m
20.3
1.4
0.8
0.6
1.0
0.8
0.1
25.0
2021
£m
40.5
(2.0)
38.5
(23.1)
15.4
The pre-exceptional effective tax rate for the year ended 31 March 2021 was 24% (FY20: 23%). The post-exceptional effective tax rate for the
same period was 33% (FY20: 24%). UK corporation tax is calculated at 19% (FY20: 19%) of the estimated assessable profit for the year. The
UK Government in its 2021 Budget announced that the main UK corporate rate would be maintained at 19% until 31 March 2023, before
being increased to 25% from 1 April 2023. This proposal is expected to be substantively enacted over the coming months whereby our UK
deferred taxes will be re-measured accordingly. However, based on our current UK deferred tax position we have estimated that this UK tax
rate increase will not give rise to a material effect.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions, these being a blended (Federal/State) rate
of 25% in the US (FY20: 27%), 28% in France (FY20: 31%), 25% in Spain (FY20: 25%), a blended rate of 30% in Germany (FY20: 30%) and a
substitute tax rate of 12% in Italy (FY20: 12%), which explains the ‘Overseas tax rate differences’ below. The US blended tax rate is estimated to
be lower this year as a result of the average US State tax rate being lower than forecast. However, as with the UK tax rate increase proposal
above, the US administration has recently proposed to increase the Federal tax rate but given the uncertainty as to when this proposal might
be substantively enacted, and in exactly what form, it is not possible to estimate its impact. We will continue to monitor the progress of this
US tax proposal and the impact upon the Group’s effective tax rate.
The charge for the year can be reconciled to the profit per the income statement as follows:
Profit before tax on continuing operations
Tax at the UK corporation tax rate of 19% (FY20: 19%)
Tax effect of items that are not deductible in determining taxable profit
Adjustments in respect of prior years – current tax
Movement in deferred tax liabilities
Overseas tax rate differences
Tax expense for the year
2021
£m
47.2
9.0
—
(2.0)
1.3
7.1
15.4
2020
£m
137.9
26.2
1.1
(1.8)
—
6.6
32.1
Given the UK parented nature of the Group, the majority of financing that the overseas businesses require is provided from the UK, and
as such the UK has provided a number of intra-group loans to its overseas operations in order to fund their growth plans. In light of the
different tax rates applicable in each of the markets in which the Group operates, as noted above, these loans result in a reduction in the
Group’s effective tax rate, which is included in ‘Overseas tax rate differences’ in the table above.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
160
Notes to financial statements
Year ended 31 March 2021
10. Taxation (continued)
In April 2019, the European Commission (the Commission) of the European Union (the EU) published its official decision in relation to
certain aspects of the UK’s Controlled Foreign Company (‘CFC’) rules. In particular, the Commission has decided that the ‘Group Financing
Exemption’ is in breach of the EU’s State Aid rules. The UK Government and a number of taxpayers have appealed this judgement applying
for the decision to be annulled. These annulment proceedings are likely to take several years before a decision is handed down. Whilst
we await the outcome of these annulment proceedings the UK has implemented legislation in order to give the European Commission’s
judgement legal effect. As a result, the Group was recently issued with a charging notice, which represented the tax that was exempted
under the UK’s CFC group financing exemption rules. The Group has submitted an appeal to HMRC in respect of this charging notice, but
under EU State Aid rules, the notice required payment within 30 days irrespective of this appeal being lodged. As a result, prior to the year
end, the Group paid the tax arising, which was not material. We had previously included the calculation of the potential liability within our
uncertain income tax estimation within current tax liabilities in the Group Balance Sheet. The Group has utilised this tax provision in settling
the HMRC charging notice and therefore it has had no adverse impact upon the Group’s effective tax rate.
A retirement benefit tax credit of £0.9m (FY20: charge £0.3m) has been recognised directly in other comprehensive income. In addition to
the amounts credited/(charged) to the income statement and other comprehensive income, the following amounts relating to tax have
been recognised directly in equity:
Current tax
Excess tax deductions related to share-based payments on exercised options
Deferred tax
Change in estimated excess tax deductions related to share-based payments
Total tax recognised directly in equity
2021
£m
2020
£m
1.5
3.0
(1.0)
0.5
(1.2)
1.8
Deferred tax
The following are the major deferred tax assets/(liabilities) recognised by the Group and the movements during the current and prior year:
Asset/(liability)
At 1 April 2019
(Charge)/credit charge to Income
Charge to equity
Credit/(charge) to
Comprehensive Income
Acquisition of subsidiaries
Exchange movements
At 1 April 2020
Credit/(charge) to Income
Charge to equity
(Charge)/credit to Comprehensive
Income
Acquisition of subsidiaries
Transfers
Exchange movements
At 31 March 2021
Timing
differences
£m
Elected
goodwill
deductions
£m
Retirement
benefit
obligations
£m
Share
schemes
£m
(3.3)
(4.8)
—
—
—
0.1
(8.0)
15.7
—
—
—
(0.6)
—
7.1
—
(0.8)
—
—
—
—
(0.8)
(1.0)
—
—
(0.3)
0.1
0.1
(1.9)
(1.2)
(0.4)
—
(0.3)
—
—
(1.9)
(0.4)
—
0.9
—
0.1
—
(1.3)
6.0
(0.3)
(1.2)
—
—
0.1
4.6
(1.0)
(1.0)
—
—
—
(0.1)
2.5
Acquired
intangible
assets
£m
(25.9)
7.7
—
—
(0.1)
(0.6)
(18.9)
10.7
—
—
(3.5)
0.3
0.2
(11.2)
Unutilised
losses
£m
Investment
revaluation
reserve
£m
Total
£m
(19.0)
(0.2)
(1.2)
0.5
(0.1)
(0.2)
(20.2)
23.1
(1.0)
(0.8)
—
—
0.8
—
—
—
—
—
(1.3)
(0.4)
—
—
—
(1.3)
(3.8)
—
(0.2)
(2.5)
6.2
(1.6)
—
—
—
0.2
4.8
(0.9)
—
—
—
0.1
(0.4)
3.6
The £15.7m credit in FY21 under timing differences relates to the exceptional write down of intangible assets (see note 7), whereby
the Group do not get an immediate current tax deduction but can claim capital allowance deductions in future tax years and, as a
consequence, have recognised a deferred tax asset. The majority of the FY21 credit within acquired intangible assets is driven by acquisitions
in our Membership & HVAC – North America segment whereby tax deductions are claimed over longer useful economic lives when
compared to the associated accounting expense, resulting in deferred tax assets being recognised. The majority of unutilised losses are
expected to be utilised within two years.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 161
Certain deferred tax assets and liabilities have been offset in the table above. The following is the analysis of the deferred tax balances (after
offset) for financial reporting purposes:
2021
Deferred tax assets
Deferred tax liabilities
Net deferred tax (liabilities)/assets
2020
Deferred tax assets
Deferred tax liabilities
Net deferred tax (liabilities)/assets
UK
£m
4.6
—
4.6
UK
£m
—
(11.8)
(11.8)
France
£m
—
(13.7)
(13.7)
France
£m
—
(14.4)
(14.4)
Spain
£m
0.9
—
0.9
Spain
£m
3.6
—
3.6
Italy
£m
—
(0.3)
(0.3)
Italy
£m
—
—
—
Germany
£m
—
(1.3)
(1.3)
Germany
£m
—
—
—
North
America
£m
7.3
—
7.3
North
America
£m
2.4
—
2.4
Total
£m
12.8
(15.3)
(2.5)
Total
£m
6.0
(26.2)
(20.2)
Deferred tax has not been recognised on £13.2m (FY20: £13.2m) of unused losses in Help-Link UK Limited due to the uncertainty over the
timing of future recovery. There are no expiry dates in respect of the unrecognised tax losses in either year.
11. Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 March 2020 of 17.8p (2019: 16.2p) per share
Interim dividend for the year ended 31 March 2021 of 6.2p (2020: 5.8p) per share
2021
£m
59.7
20.8
80.5
2020
£m
54.1
19.4
73.5
The proposed final dividend for the year ended 31 March 2021 is 19.8p per share amounting to £66.5m (FY20: 17.8p per share amounting to
£59.7m). The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a
liability in these financial statements. The payment of this dividend will not have any tax consequences for the Group.
12. Earnings per share
Basic
Diluted
Adjusted basic
Adjusted diluted
The calculation of the basic and diluted earnings per share is based on the following data:
Number of shares
Weighted average number of shares
Basic
Dilutive impact of share options
Diluted
Earnings
Profit for the year attributable to equity holders of the parent
Amortisation of acquisition intangibles
Certain transaction related costs (note 7)
Exceptional items (note 7)
Tax impact arising on adjusting and exceptional items
Non-controlling interests' share of adjusting items
Adjusted profit for the year attributable to equity holders of the parent
2021
pence
9.3
9.2
42.7
42.6
2020
pence
31.7
31.5
41.3
41.0
2021
m
2020
m
335.8
1.0
336.8
2021
£m
31.1
45.0
6.7
92.4
(29.7)
(2.1)
143.4
334.2
2.8
337.0
2020
£m
106.0
35.5
—
7.6
(11.0)
—
138.1
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 162
Notes to financial statements
Year ended 31 March 2021
12. Earnings per share (continued)
Basic and diluted earnings per ordinary share have been calculated in accordance with IAS 33 Earnings Per Share. Basic earnings per share
is calculated by dividing the profit or loss in the financial year by the weighted average number of ordinary shares in issue during the year.
Adjusted earnings per share is calculated excluding the amortisation of acquisition intangibles, certain transaction related costs, exceptional
items and the associated tax impacts.
The Group uses adjusted operating profit, adjusted operating margin, adjusted EBITDA, adjusted profit before tax and adjusted earnings
per share as its primary performance measures. These are non-IFRS measures which exclude the impact of exceptional items, certain
transaction related costs, the amortisation of acquisition intangibles and the associated tax impacts. For further details refer to the
‘Profitability’ section of the Glossary.
Diluted earnings per share includes the impact of dilutive share options in issue throughout the year.
13. Goodwill
Cost
At 1 April 2019
Recognised on acquisition of subsidiaries
Impairment
Adjustment related to prior year acquisition
Exchange movements
At 1 April 2020
Recognised on acquisition of subsidiaries
Adjustments related to prior year acquisitions
Exchange movements
At 31 March 2021
£m
407.9
92.8
(0.5)
0.3
9.4
509.9
72.3
4.1
(22.0)
564.3
Adjustments to provisional balances
During FY21 the provisional fair values for the acquisitions completed in FY20 and disclosed as part of the Group’s FY20 Annual Report
were updated leading to a total £4.1m increase to goodwill at 31 March 2021. This increase in goodwill arose due to fair value adjustments
associated with the acquisition of eLocal Holdings LLC totalling £2.6m. £2.1m (79%) of these adjustments were recognised in goodwill with
£0.5m (21%) being booked to non-controlling interests in equity. Additional adjustments of £1.6m related to prior year acquisitions were
recognised on the acquisition of Crawford Services Inc with a further £0.4m other fair value adjustments recorded across five other prior
year acquisitions.
FY20 Impairment of goodwill associated with the acquisition of Somgas Hogar S.L.
During the period between acquisition on 25 July 2019 and 31 March 2020 a significant revenue generating contract of Somgas Hogar S.L.,
a Group company, ceased. In light of these circumstances and due to the recent nature of the acquisition, it was considered appropriate to
perform a separate impairment review of the Somgas business, resulting in an impairment to goodwill of £0.5m. The recoverable amount
of goodwill associated with Somgas at 31 March 2020 was £2.8m based on its value in use. The financial performance and position of
Somgas is reported within the Group's "Spain" segment and in the "HVAC" business line. The discount rate used to perform the impairment
assessment was consistent with that of the "Spain" CGU disclosed below.
Impairment testing methodology and goodwill allocation
Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to benefit from that business
combination. The Group’s CGUs are defined as the lines of business within each geographic territory in which the Group operates, because
they represent the smallest identifiable group of assets that generate cash flows. The Group tests goodwill annually for impairment, or more
frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value in use
calculations.
The key assumptions for the value in use calculations are those regarding growth rates, discount rates and expected changes to selling
prices and direct costs during the period. The Group prepares cash flow forecasts derived from the most recent financial budgets and plans
for the next three years approved by the Directors and extrapolates the annual cash flows using estimated, long-term growth rates.
The growth rates are based on detailed business plans and although long-term growth rate forecasts may be higher in certain territories, the
lowest rate across the Group has been applied to reduce the risk that value in use calculations are overstated. The long-term growth rate
utilised is 2% (FY20: 2%). Changes in selling prices and direct costs are based on expectations of future changes in the market.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 163
Where significant investment is planned in a CGU during the typical three year plan period approved by the Directors, a period of actual
cash flows deviating from the standard period may be deemed more appropriate for purposes of impairment testing.
Management estimates the discount rates using pre-tax rates that reflect current market assessments of the time value of money. The pre-
tax cost of capital rates used to discount the forecast pre-tax cash flows are different for each CGU and are as follows:
Segment
CGUs
Membership & HVAC – North America
North America
Membership & HVAC – EMEA UK
Membership & HVAC – EMEA France
Membership & HVAC – EMEA Spain
Home Experts - UK
Home Experts - North America
Home Experts - Other
UK
France
Spain
Checkatrade
eLocal
Habitissimo
2021
10.9%
10.4%
9.5%
10.2%
11.8%
12.5%
11.6%
2020
10.3%
9.8%
9.5%
10.4%
11.6%
12.2%
12.8%
Pre-tax cost of capital rates reflect the latest cost of debt and equity for a sample of comparable companies in accordance with the market
participant premise detailed in IAS 36.
The Group has conducted a sensitivity analysis on the impairment test of each CGU’s carrying value, which also reflects the different risk
profile of each CGU.
Having performed this analysis, for all CGUs other than Checkatrade and Habitissimo, the Group believes that there are no reasonably
possible changes to the key assumptions in the next year which would result in the carrying amount of goodwill exceeding the recoverable
amount. This view is based upon inherently judgemental assumptions, although the judgements taken are prudent and reasonable and also
takes account of the headroom in the value in use calculation versus the current carrying value. In Habitissimo, with all other assumptions
held static, the relevant discount rate within the value in use calculation would need to increase by 0.8ppts (to 12.4%) for headroom to
reduce to £nil. No reasonably possible change in discount rate would reduce headroom in the Checkatrade CGU to £nil. Performing
the same sensitivities on the terminal free cash flow assumption would require reductions of 35% (Checkatrade) and 10% (Habitissimo)
respectively to reduce headroom to £nil.
The carrying amount of goodwill has been allocated, by CGU, as follows:
North America
UK
France
Spain
Checkatrade
eLocal
Habitissimo
The Group’s CGUs do not contain any intangible assets with indefinite useful economic lives.
2021
£m
94.3
183.8
103.4
53.6
58.6
58.2
12.4
2020
£m
76.8
183.6
93.6
23.7
58.6
62.3
11.3
564.3
509.9
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 164
Notes to financial statements
Year ended 31 March 2021
14. Other intangible assets
Cost
At 1 April 2019
Additions
Acquisition of subsidiaries
Disposals
Transfers
Exchange movements
At 1 April 2020
Additions
Acquisition of subsidiaries
Disposals
Disposal of subsidiary
Adjustments to prior year
acquisitions 1
Exchange movements
At 31 March 2021
Accumulated amortisation
At 1 April 2019
Charge for the year
Impairment
Disposals
Transfers
Exchange movements
At 1 April 2020
Charge for the year
Impairment
Disposals
Exchange movements
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Acquired
access rights
£m
Acquired
customer
databases
£m
Other
acquired
intangibles
£m
Total
acquisition
intangibles
£m
Trademarks &
access rights
£m
Customer
databases
£m
Software
£m
Total
intangibles
£m
126.5
224.9
13.9
365.3
4.1
72.3
—
(3.7)
8.7
4.2
6.7
(0.2)
3.7
7.6
—
1.4
—
—
—
8.3
80.4
(0.2)
—
16.3
207.9
246.9
15.3
470.1
0.8
2.0
—
—
(1.2)
(19.7)
189.8
35.7
13.8
—
—
0.1
1.8
51.4
15.6
—
—
(4.5)
62.5
0.6
26.6
(1.2)
—
—
(15.7)
257.2
98.2
19.9
0.7
—
(0.1)
3.6
122.3
27.4
—
(1.2)
(8.3)
140.2
—
—
—
—
(0.2)
(0.1)
15.0
2.3
1.8
—
—
—
—
4.1
2.0
—
—
—
6.1
1.4
28.6
(1.2)
—
(1.4)
(35.5)
462.0
136.2
35.5
0.7
—
—
5.4
177.8
45.0
—
(1.2)
(12.8)
208.8
37.4
4.8
—
—
—
0.8
43.0
0.7
—
(0.4)
—
—
(1.7)
41.6
30.4
4.1
1.0
—
(0.8)
0.4
35.1
2.3
—
(0.2)
(1.2)
36.0
17.6
13.1
—
—
—
0.7
31.4
15.0
—
—
—
—
(2.2)
44.2
4.8
3.5
—
—
0.8
0.2
9.3
6.8
—
—
(0.7)
15.4
253.6
45.4
0.1
(4.5)
0.7
3.1
298.4
52.8
1.2
(1.7)
(0.3)
—
(8.0)
673.9
71.6
80.5
(4.7)
0.7
20.9
842.9
69.9
29.8
(3.3)
(0.3)
(1.4)
(47.4)
342.4
890.2
83.9
30.7
11.9
(4.5)
0.2
1.4
123.6
35.3
84.7
(1.0)
(3.9)
255.3
73.8
13.6
(4.5)
0.2
7.4
345.8
89.4
84.7
(2.4)
(18.6)
238.7
498.9
127.3
156.5
117.0
124.6
8.9
11.2
253.2
292.3
5.6
7.9
28.8
22.1
103.7
174.8
391.3
497.1
1 The carrying value of acquired intangible assets relating to prior year acquisitions have been adjusted during the associated re-measurement periods reducing the value of acquired
access rights by £1.2m, other intangibles by £0.2m and increasing goodwill by £1.4m. See note 13 for further details.
Other acquired intangibles include acquired brands and technology assets. At the balance sheet date, there are no contractual
commitments for the purchase of intangible assets (FY20: £nil).
Acquired access rights include assets with a book value of £51.0m (FY20: £62.1m) in respect of customer relationships acquired as part of
the acquisition of eLocal Holdings LLC in FY20. The assets are being amortised over periods ranging between 10 and 11 years on a straight-
line basis and have over 8 to 9 years useful economic life remaining.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021
165
Year ended 31 March 2021
Impairment
At 31 March 2021 the carrying value of the eServe customer relationship management system and associated intangibles within the UK
Membership business were reviewed for impairment resulting in impairment charges of £82.6m being recorded within software assets,
bringing the post impairment carrying value of the eServe CRM system to £nil (FY20: £81.8m). In addition, an impairment of £2.1m was
recognised in association with other intangible software assets, bringing the post impairment carrying value of the asset to £nil. Total
impairment charges of £84.7m have been treated as exceptional due to their size, nature and incidence (see note 7).
Year ended 31 March 2020
Impairment
At 31 March 2020 the carrying value of intangible assets associated with HomeServe Labs were reviewed for impairment resulting in
charges being recorded in association with the software assets (£11.9m) and trademarks & access rights (£1.0m) of the business. The total
impairment charges of £12.9m associated with HomeServe Labs related intangible assets were treated as exceptional due to their size,
nature and incidence (see note 7). Post impairment the carrying value of the impaired intangibles was £nil.
Additionally, during the period between acquisition on 25 July 2019 and 31 March 2020 a significant revenue generating contract of Somgas
Hogar S.L., a Group company, ceased. In light of these circumstances and due to the recent nature of the acquisition, it was considered
appropriate to perform a separate impairment review of the Somgas business, resulting in an impairment to acquired customer databases of
£0.7m. For additional detail on the impairment review of the Somgas business see note 13.
15. Property, plant and equipment
Cost
At 1 April 2019
Transfers 1
Additions
Disposals
Acquisition of subsidiaries
Exchange movements
At 1 April 2020
Additions
Disposals
Acquisition of subsidiaries
Exchange movements
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Transfers 1
Charge for the year
Disposals
Exchange movements
At 1 April 2020
Charge for the year
Disposals
Exchange movements
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Land & buildings
£m
Furniture, fixtures
& equipment
£m
Computer
equipment
£m
Motor
vehicles
£m
37.8
0.4
2.3
(0.4)
0.4
0.3
40.8
0.5
(0.2)
0.7
(0.6)
41.2
15.5
—
1.7
(0.2)
0.2
17.2
2.1
(0.2)
(0.4)
18.7
22.5
23.6
13.7
(0.5)
1.6
(0.2)
0.1
0.2
14.9
0.7
(0.1)
0.3
(0.4)
15.4
9.3
(0.9)
2.1
(0.2)
0.1
10.4
1.5
(0.1)
(0.3)
11.5
3.9
4.5
32.0
(0.3)
3.3
(0.3)
0.2
0.6
35.5
4.2
(1.9)
0.3
(1.3)
36.8
20.0
(0.3)
5.1
(0.3)
0.4
24.9
4.9
(1.5)
(0.9)
27.4
9.4
10.6
8.5
(6.1)
1.3
(0.5)
1.2
0.3
4.7
1.7
(0.3)
2.9
(0.6)
8.4
4.4
(3.1)
0.4
(0.4)
0.1
1.4
1.4
(0.2)
(0.1)
2.5
5.9
3.3
Total
£m
92.0
(6.5)
8.5
(1.4)
1.9
1.4
95.9
7.1
(2.5)
4.2
(2.9)
101.8
49.2
(4.3)
9.3
(1.1)
0.8
53.9
9.9
(2.0)
(1.7)
60.1
41.7
42.0
1 Included within transfers in FY20 is a carrying book value of £1.7m in respect of assets held under finance leases at 31 March 2019. At 1 April 2019, on transition to IFRS 16, these
amounts were transferred to right of use assets. See note 26.
At the balance sheet date, there are no contractual commitments for the purchase of property, plant and equipment (FY20: £nil).
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 166
Notes to financial statements
Year ended 31 March 2021
16. Acquisitions and Disposals
The Group has incurred a net cash outflow in respect of business combinations of £77.3m in the year (FY20: £140.6m).
There were two material acquisitions in the year ended 31 March 2021.
• On 26 June 2020, HomeServe Spain S.L.U., a Group company, acquired 99.45% of the issued share capital and obtained control of
Solusat Asistencia Técnica S.L., (hereafter ‘Solusat’). On 26 March 2021, the remaining 0.55% of the issued share capital of Solusat was
acquired. The acquisition of Solusat enhances the scale and scope of the Group’s HVAC capabilities in Spain.
• On 10 August 2020, HomeServe Asistencia Spain S.A.U, a Group company, acquired 100% of the issued share capital and obtained
control of Mesos Gestión y Servicios S.L., (hereafter ‘Mesos’). Mesos has a 100% shareholding of Mesos Portugal Unipessoal LDA and
therefore was obtained indirectly by HomeServe Asistencia Spain S.A.U. The acquisition of Mesos continues to expand the Group’s
home assistance services and increases the opportunity for future growth in this market.
Additionally, the following immaterial acquisitions, which have been combined and presented as ‘Other’ for the purpose of provisional fair
value disclosures, were made during the year ended 31 March 2021.
HVAC
Date
29 May 2020
29 May 2020
1 June 2020
30 July 2020
Acquiree
Aujard SAS
Ei Minerbe SAS
Acquirer
Acquired
HomeServe Energy Services SAS
100% share capital
ID Energies SAS
Hays Cooling and Heating LLC
Servicio Técnico Urueña S.L.
HomeServe HVAC LLC
HomeServe Spain S.L.U.
3 August 2020
Worry Free Comfort Systems Inc.
HomeServe HVAC LLC
31 August 2020
Ei Multi Chauff SAS
ID Energies SAS
29 September 2020
UGI HVAC Enterprises Inc.
30 September 2020
Conviflamme SAS
30 September 2020
Lesage SAS
30 September 2020
Réseau Energies SARL
HomeServe USA Energy Services
LLC
HomeServe Energy Services SAS
Conviflamme SAS
Conviflamme SAS
31 October 2020
Sociéte de Maintenance Thermique SAS
HomeServe Energy Services SAS
Group of assets constituting a
business under IFRS 3
100% share capital
100% share capital
100% share capital
Group of assets constituting a
business under IFRS 3
Group of assets constituting a
business under IFRS 3
100% share capital
100% share capital
95% share capital - bringing the
total shareholding to 100%
100% share capital
17 November 2020
Arizona’s Dukes of Air LLC
8 December 2020
Sterling Air Services LLC
HomeServe HVAC LLC
HomeServe HVAC LLC
9 December 2020
Aragonesa De Postventa S.L.U.
HomeServe Spain S.L.U.
100% share capital
100% share capital
100% share capital
31 December 2020
G2M SAS
HomeServe Energy Services SAS
100% share capital
31 December 2020
31 December 2020
31 December 2020
26 February 2021
15 March 2021
17 March 2021
17 March 2021
31 March 2021
Canyon State Air Conditioning and Heating
LLC
Aqua Plumbing & Heating Services Limited HomeServe Membership Limited
HomeServe HVAC LLC
100% share capital
100% share capital
PH Energies SAS
(and subsidiaries PH9 SAS and Pack SD SAS)
Técnica Del Frio Landaluce S.L.U.
Environmental Systems Associates Inc.
HomeServe HVAC LLC
HomeServe Energy Services SAS
100% share capital
HomeServe Spain S.L.U.
HomeServe Spain S.L.U.
HomeServe Spain S.L.U.
100% share capital
100% share capital
100% share capital
100% share capital
HomeServe Energy Services SAS
100% share capital
Mantenimientos Holguin S.L.U.
Ifoncale Navarra S.L.U.
Roussin Energies SAS
All HVAC acquisitions made during FY21 enhance the scale and scope of the Group’s HVAC capabilities and increase the opportunity for
future growth related to new HVAC system installations.
Other acquisitions
• On 1 June 2020, HomeServe SEM LLC, a Group company, acquired a group of assets constituting a business under IFRS 3 from
Vincodo LLC.
• On 30 December 2020, Habitissimo S.L, a Group company, acquired 100% of the issued share capital and obtained control of
Preventivi SRL.
The acquisition of these businesses strengthens HomeServe’s search engine marketing capabilities, contributing to growth strategies across
a variety of business lines, notably Home Experts.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 The provisional fair values of identifiable assets acquired and liabilities assumed are set out in the table below:
At fair value
Software
Property, plant and equipment
Right-of-use assets
Cash and cash equivalents
Inventories
Trade and other receivables
Trade and other payables, provisions & retirement benefit obligations
Deferred income
Lease liabilities
Bank & other loans
Intangible assets identified on acquisition
Deferred tax liabilities
Net assets acquired
Goodwill
Total
Satisfied by:
Cash
Deferred consideration
Contingent consideration at fair value
Total
Net cash outflow arising on acquisition:
Cash consideration
Less: Cash acquired
Total
Solusat
£m
Mesos
£m
—
—
—
0.3
0.2
2.2
(2.0)
—
—
—
5.1
(1.3)
4.5
14.7
19.2
19.2
—
—
19.2
19.2
(0.3)
18.9
1.0
0.5
0.2
1.1
0.3
3.0
(2.5)
—
(0.2)
(2.4)
6.4
(1.6)
5.8
15.0
20.8
14.9
—
5.9
20.8
14.9
(1.1)
13.8
Other
£m
0.2
3.7
3.8
8.2
3.8
7.1
(9.4)
(4.0)
(3.8)
(1.9)
17.1
(0.9)
23.9
42.6
66.5
49.2
2.8
14.5
66.5
49.2
(8.2)
41.0
167
Total
£m
1.2
4.2
4.0
9.6
4.3
12.3
(13.9)
(4.0)
(4.0)
(4.3)
28.6
(3.8)
34.2
72.3
106.5
83.3
2.8
20.4
106.5
83.3
(9.6)
73.7
The information above is provisional with fair value assessment activities ongoing. The other column relates to 25 individually immaterial
business combinations completed during the year. Contingent consideration associated with Mesos is dependent upon performance
against certain profitability metrics. There is no range of outcomes associated with the balance as the earnout payment was finalised based
on results to 31 March 2021 at £5.9m.
The goodwill arising on the excess of consideration over the fair value of the assets and liabilities acquired represents the expectation of
future growth, synergistic benefits and efficiencies. Where elections are made to treat an acquisition that is in scope of US tax legislation as
an asset purchase for tax, goodwill is deemed deductible for tax purposes. Where goodwill arises on consolidation within the Group it is not
deductible for tax purposes, but tax deductions on goodwill amortisation may arise at a local level in certain territories, subject to specific
local rules. Deferred tax liabilities associated with elected goodwill deductions are disclosed in note 10. The gross contracted amounts due
are equal to the fair value amounts stated above for trade and other receivables.
The post-acquisition revenue, adjusted operating profit and acquisition-related costs (included in operating costs) from these acquisitions in
the year ended 31 March 2021 were as follows:
Revenue
Adjusted operating profit
Acquisition related costs
Solusat
£m
6.0
1.3
0.1
Mesos
£m
14.9
2.0
0.2
Other
£m
42.6
2.1
1.1
Total
£m
63.5
5.4
1.4
If all of the acquisitions had been completed on the first day of the financial year, Group revenues for the year would have been £1,363.5m
and Group adjusted profit before taxation would have been £196.8m.
In addition to the net cash outflow on the acquisitions above of £73.7m, deferred and contingent consideration was paid relating to previous
business combinations of £3.6m (FY20: £6.4m).
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 168
Notes to financial statements
Year ended 31 March 2021
16. Acquisitions and Disposals (continued)
Disposal of subsidiary – Home Experts France
On 15 May 2020, HomeServe France Holdings SAS (‘HFH’), a Group company, disposed of 80% of its 100% interest in HomeServe Home
Experts SAS, subsequently renamed Groupe Maison.fr SAS (‘Maison.fr’). The total fair value of the consideration and retained interest was
£4.1m. The Group realised a net loss on disposal as a result of this transaction of £0.1m. The net assets of the Group’s interest in the business
at the date of disposal were as follows:
At fair value
Non-current assets
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Total identifiable net assets
Loss on disposal
Total consideration
Satisfied by:
Cash
Interest in other investment
Fair value of call option
Net cash outflow arising on disposal:
Consideration received in cash and cash equivalents
Less: cash and cash equivalent balances disposed 1
£m
0.4
3.9
0.1
(0.2)
4.2
(0.1)
4.1
—
2.9
1.2
4.1
—
3.9
3.9
1 In accordance with the terms of the deal HFH subsequently reimbursed the new owners for any receivables outstanding at 31 March 2020 that were not collected within the
subsequent six months. This resulted in an incremental £0.1m payment to the new owners during the second half of FY21, bringing the total cash disposed balance to £3.9m versus
£3.8m disclosed at HY21.
HFH retained a 20% holding in Maison.fr following the disposal. Having reviewed the remaining rights and obligations of HFH under the
associated sale and purchase agreement, the Group have assessed that HFH does not have significant influence over the financial and
operating policies of the entity, or the ability to use its power to affect its returns through its retained shareholding. HFH’s potential future
voting rights afforded to it via its call option over an additional 24.17% equity stake (see below) have not been considered in this assessment
as they are not currently exercisable. As a result, the holding is considered to be a non-controlling interest in Maison.fr which has been
accounted for under IFRS 9. The Group has elected to classify the instrument as an investment recorded at fair value through other
comprehensive income.
As a result of the above transaction, HFH acquired a call option exercisable in April 2022 which provides the opportunity to acquire a further
24.17% equity stake of Maison.fr for a fixed price of €3.7m/£3.3m. The fair value of the option has been established using a Black-Scholes
pricing model resulting in a fair value at initial recognition of £1.2m which has been treated as an element of the consideration received for
the 80% interest disposed of. The option carrying value is held within other financial assets on the balance sheet. Subsequent changes in the
fair value of the option will be recorded in the income statement. For the period from initial recognition to 31 March 2021 the change in fair
value, before the impact of foreign exchange, was £0.1m, see note 27 for further details.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021
17. Other investments
Equity investments carried at fair value through other comprehensive income
At 1 April 2019
Fair value loss on FVTOCI investment
Exchange movements
At 1 April 2020
Additions (see note 16)
Fair value gain on FVTOCI investments
Exchange movements
At 31 March 2021
169
£m
9.2
(3.7)
0.1
5.6
2.9
4.6
(0.2)
12.9
On 15 May 2020, HomeServe France Holdings SAS (‘HFH’), a Group company disposed of 80% of its 100% interest in HomeServe Home
Experts SAS, subsequently renamed Groupe Maison.fr SAS. HFH retained a 20% holding in Groupe Maison.fr SAS, which is treated as a non-
controlling interest and has been accounted for under IFRS 9. The Group has elected to classify the instrument as an investment recorded at
fair value through other comprehensive income. See note 16 for further details on the disposal. For the period from initial recognition to 31
March 2021 the change in fair value recorded in other comprehensive income was £0.2m.
At 31 March 2021 the fair value of the Group's investment held in a manufacturer of smart thermostat connected home technology was
reassessed in light of the valuation indicated by the investee’s latest equity funding round. The result of this reassessment increased the fair
value of the Group’s investment by £4.4m. This movement, net of the recognition of a £1.3m associated deferred tax liability, (see note 10)
was recorded in the investment revaluation reserve.
18. Equity accounted investments
A list of equity accounted investments, including the name, address, country of incorporation, and proportion of ownership is given in note
50 to the Company’s separate financial statements.
The Group made additional contributions to its joint venture investment in HomeServe Japan Corporation during the year of £2.2m. (FY20:
£nil).
Year ended 31 March 2021
Acquisition of interest in associate
On 22 February 2021, HomeServe France Holdings, a Group company, acquired a 20% holding in Mouse Holding SAS for €2,000.
Disposal of interest in associate
On 31 March 2021 HomeServe USA Corp disposed of its 20% equity interest in Centriq Technology Inc. (‘Centriq’) in exchange for a
perpetual licence to the technology underpinning Centriq’s mobile application which provides customers with a cutting-edge digital home
product and system catalogue with ancillary maintenance and repair service solutions. This transaction represented a non-monetary asset
exchange in which the Group determined the fair value of the consideration received by reference to the fair value of the asset given up,
namely the 20% equity interest in Centriq, which was estimated to be $1.1m/£0.8m. At 31 March 2021, the carrying value of the Group’s
investment in Centriq of $4.0m/£2.9m was derecognised and the Group recorded a loss on disposal of £2.1m in the income statement and
recognised an intangible asset for £0.8m representing the value of the licence acquired.
Year ended 31 March 2020
Disposal of interest in associate
On 1 August 2019 HomeServe International Limited, a Group company, disposed of its 49% equity accounted investment in Assistenza Casa
Srl, by way of sale for cash consideration of €9.4m (£8.4m). At the point of disposal the carrying value of the Group’s investment was £4.6m
resulting in the recognition of a £3.8m gain in the consolidated income statement. The gain has been classified as exceptional due to its
size, nature and incidence.
Summary Financial Information
The following amounts relate to the combined results of the Group’s associate interests in Centriq (until date of disposal), Assistenza Casa
S.R.L (until date of disposal) as well as its joint venture interest in HomeServe Japan Corporation:
Loss after tax
Total comprehensive expense
Amounts recognisable
2021
£m
(5.5)
(5.5)
(2.5)
2020
£m
(5.9)
(5.9)
(2.1)
The proportion of the Group’s ownership interest in equity accounted investments is equal to their carrying amounts in the consolidated
balance sheet.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
170
Notes to financial statements
Year ended 31 March 2021
19. Inventories
Consumables
20. Trade and other receivables
Amounts receivable for the provision of services
Other receivables
Accrued income
Prepayments
2021
£m
12.2
2021
£m
424.0
44.7
18.1
14.2
501.0
2020
£m
7.9
2020
£m
427.3
33.6
16.9
17.6
495.4
Credit risk
Where the Group contracts directly with the consumer of its services, the counterparty to the financial asset in question (the tradesperson
or policyholder) is the primary driver of the Group’s credit exposure. Where the Group acts as an insurance intermediary, the counterparty
to the financial asset in question (the underwriter) is not the primary driver of the Group’s credit exposure, rather the risk derives from
the creditworthiness of the underlying policyholder. In both instances the relevant credit risk pools are numerous and diverse, thereby
mitigating the significance of the Group’s exposure to any single pool of risk. Of the at risk balance at the end of the year there is no
significant concentration of credit risk within an individual pool, with risk exposure spread across a large number of policyholders or
tradespersons. There are no risk exposures that represent more than 5% of the total balance at risk. Note 3 contains further detail regarding
the potential risk if policy cancellations were to be higher than expected.
Risks associated with the environments in which customers and policyholders operate may also influence the credit risk. Credit quality of
customers is assessed by taking into account the current financial position of the counterparty, past experience and forward looking factors,
including economic outlook. In determining the recoverability of a trade receivable, the Group considers any change in the credit quality
from the date credit was initially granted up to the reporting date. The Group’s exposures are further reduced by its ability, in the event of
default, to cease providing member services or to take policyholders “off risk”. A default on a trade receivable is when the counterparty
fails to make contractual payments within the stated payment terms. Balances are written off when there is no reasonable expectation of
recovery and carrying amounts represent the maximum potential credit exposure.
Trade receivables and accrued income are subject to impairment using the expected credit loss model. The Group applies the IFRS 9
simplified approach to measuring expected credit losses which uses a lifetime expected credit loss allowance for all trade receivables and
contract assets. Consequently the IFRS 9 concept of a significant increase in credit risk is not applicable to the Group’s expected credit loss
calculations. To assess expected credit losses, balances are either assessed individually or grouped based on similar credit risk characteristics
(e.g. type of customer or days past due). Expected losses are then measured using a provisioning matrix approach adjusted, where
applicable, to take into account current macro-economic factors or counterparty specific considerations.
The Group trades only with creditworthy third parties and maintains a policy that, with the exception of our membership policyholders,
customers who wish to trade on credit terms are reviewed for financial stability. The Group has provided fully for those balances that it does
not expect to recover. This assessment has been undertaken by reviewing the status of all at risk balances in line with the process described
above. The Directors believe that there is no further credit provision required in excess of the expected credit loss provision.
Included in the Group’s exposure are balances with a carrying amount of £34.5m (FY20: £26.8m) which are past due at the reporting date
but for which the Group has not provided for as there has not been a significant change in credit quality and the amounts are still considered
recoverable. The Group does not hold any collateral over these balances.
Ageing of balances past due net of expected credit losses:
1 - 30 days
31 - 60 days
61 - 90 days
91 days +
Balance at 31 March past due
Current/not yet due
At 31 March
2021
£m
19.3
7.9
2.5
4.8
34.5
389.5
424.0
2020
£m
12.5
6.5
4.7
3.1
26.8
400.5
427.3
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 Movement in expected credit losses:
At 1 April
Impairment losses recognised
Amounts written off
Amounts recovered
Acquisition of subsidiaries
Transfers
Exchange movements
At 31 March
Of the provision total £nil relates to accrued income (FY20: £nil).
Ageing of impaired balances:
1 - 30 days
31 - 60 days
61 - 90 days
91 days +
Current/not yet due
At 31 March
171
2020
£m
1.6
4.9
(2.3)
(0.8)
0.3
—
0.1
3.8
2020
£m
0.3
0.6
0.1
0.6
2.2
3.8
2021
£m
3.8
2.4
(1.7)
(0.3)
0.6
1.2
(0.1)
5.9
2021
£m
0.2
0.5
0.7
2.4
2.1
5.9
Other receivables
Other receivables principally comprise deposits, tax balances due to the Group and other non-trading items. No expected credit loss
allowance was recognised at 31 March 2021 or 31 March 2020 as there has been no experience of significant historic losses and no charge
was reported in the income statement. No other receivable balances were considered past due but not impaired.
21. Cash and cash equivalents
Cash and cash equivalents in the Group balance sheet
Bank overdrafts
Cash and cash equivalents in the Group cash flow statement
2021
£m
171.4
(22.0)
149.4
2020
£m
131.2
—
131.2
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or
less. Of the total cash and cash equivalents balance held £19.3m (FY20: £14.5m) is not available for use by the Group due to the restrictions
stipulated within the Group’s contractual relationships with underwriters. These balances principally relate to advances from underwriters
received to fund claims payments. No client monies as defined under CASS 5 of the FCA Handbook are held.
With respect to credit risk arising from cash and cash equivalents, the Group’s exposure arises from the probability of default of the
counterparty. The Group manages the risk associated with cash and cash equivalents through depositing funds only with reputable and
creditworthy banking institutions.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 172
Notes to financial statements
Year ended 31 March 2021
22. Trade and other payables – current
Trade payables and accruals
Contingent consideration
Deferred consideration
Obligations under put options
Deferred income
Refund liabilities
Taxes and social security, excluding current tax
Amounts related to policyholders to be remitted to underwriters
Other payables
2021
£m
158.9
17.0
4.0
24.6
62.2
23.6
13.2
82.1
69.3
2020
£m
155.5
0.9
4.7
—
51.7
24.3
14.3
92.7
66.5
454.9
410.6
Trade payables, other payables and accruals principally comprise amounts outstanding for trade purchases and other ongoing costs.
Deferred and contingent consideration relate to future amounts payable, or potentially payable, on business combinations and asset
purchases.
Obligations under put options relate to the obligation to acquire the remaining 21% non-controlling interest in eLocal Holdings LLC,
following HomeServe USA Holdings Corp’s initial 79% acquisition in FY20. Put options classified as current are exercisable by the holder
from July 2021.
Deferred income represents revenue where an obligation exists to provide future services. An appropriate proportion of monies received in
advance are treated as deferred income and recognised over the relevant period (see note 4).
Refund liabilities are made in respect of those policies that may be cancelled by the policyholder part way through the contractual term,
which will affect the economic benefits that flow to the Group. The liability is made to ensure that the related revenue is not recognised at
the point that the policy incepts.
Amounts related to policyholders to be remitted to underwriters principally relate to the cost of underwriting and Insurance Premium Tax for
cash collected or cash to be collected from policyholders for the provision of services, not yet transmitted.
23. Trade and other payables – non-current
Contingent consideration
Deferred consideration
Obligations under put options
Other non-current payables
2021
£m
12.8
6.8
9.7
2.5
31.8
2020
£m
10.5
8.8
31.3
1.7
52.3
Deferred and contingent consideration relate to future amounts payable, or potentially payable, on business combinations and asset
purchases.
Obligations under put options relate to the obligation to acquire the remaining 21% non-controlling interest in eLocal Holdings LLC,
following HomeServe USA Holdings Corp’s initial 79% acquisition in FY20. Put options classified as non-current are exercisable by the holder
between July 2023 and July 2025.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021
24. Provisions
Movements in provisions during the years ended 31 March 2021 and 31 March 2020 are disclosed below:
At 1 April 2019
Created
Utilised
Transferred
At 1 April 2020
Created
Acquired on business acquisition
Utilised
Released
Transferred
Foreign exchange
At 31 March 2021
Restructuring
costs
£m
3.9
1.6
(4.5)
—
1.0
1.1
—
(1.7)
(0.2)
—
—
0.2
Other
£m
1.8
0.8
(1.2)
(0.4)
1.0
5.5
0.1
(1.9)
(0.8)
2.0
(0.1)
5.8
173
Total
£m
5.7
2.4
(5.7)
(0.4)
2.0
6.6
0.1
(3.6)
(1.0)
2.0
(0.1)
6.0
Where material, provisions are discounted based on an approximation for the time value of money. The amount and timing of the cash
outflows are subject to variation. Provisions are principally expected to be utilised over the next 12 months.
Restructuring costs
Movements on provisions for restructuring during the year principally relate to the costs associated with programs in the Group’s UK and
HomeServe Labs businesses as discussed in note 7. The closing balance of £0.2m relates to restructuring charges in our Home Experts
businesses.
Other
Principal movements on other provisions during the period related to:
• Provisions created of £2.5m related to the costs associated with a customer re-contact exercise in the UK Membership business which
was completed during the year, with a utilisation of £1.8m and subsequent release of £0.7m.
• Provisions created in the UK Membership business of £2.2m for onerous contracts associated with eServe intangible assets, which were
impaired during the year (see note 7).
25. Borrowings
Bank and other loans
Sterling denominated
US dollar denominated
Euro denominated
Due within one year
Sterling denominated
US dollar denominated
Euro denominated
Due after one year
Total bank and other loans
2021
£m
40.1
2.3
11.6
54.0
242.8
280.5
56.5
579.8
633.8
2020
£m
27.5
1.6
11.2
40.3
245.2
267.9
27.5
540.6
580.9
Bank and other loans due within one year includes bank facilities due within one year (£26.4m), overdrafts in relation to our cash pooling
arrangements (£22.0m) and interest due on borrowings (£5.6m).
The US Dollar and Euro denominated borrowings are used to provide debt funding to the North America and Continental Europe
operations respectively. Foreign currency borrowings are drawn in the UK and passed to the overseas subsidiaries of the Group by way of
intercompany loans, denominated in the same currencies. These external borrowings and the equivalent intercompany receivable loans are
treated as monetary liabilities and assets respectively and, as such, the Group’s foreign currency exposure risk is minimised.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
174
Notes to financial statements
Year ended 31 March 2021
25. Borrowings (continued)
The weighted average interest rates paid on bank and other loans were as follows:
Fixed
Floating
2021
2020
£
%
3.2
1.2
€
%
—
1.1
$
%
4.1
1.2
£
%
3.2
1.7
€
%
—
1.0
$
%
5.0
2.9
All of the Group’s borrowings are unsecured. The currencies in which the Group’s borrowings are denominated reflect the geographical
segments for which they have been used.
On 21 August 2020 the Group completed a financing transaction in the United States Private Placement market, issuing notes amounting to
$250.0m and £54.0m as detailed below:
Title
7yr GBP Senior Notes
7yr USD Senior Notes
10yr GBP Senior Notes
10yr USD Senior Notes
12yr GBP Senior Notes
12yr USD Senior Notes
Principal
£19.0m
$125.0m
£20.0m
$63.0m
£15.0m
$62.0m
Maturity
20 August 2027
20 August 2027
20 August 2030
20 August 2030
20 August 2032
20 August 2032
Coupon
3.06%
3.34%
3.21%
3.58%
3.25%
3.68%
The principal features of the Group’s other borrowings are as follows:
• The Group has a £400m revolving credit facility with seven banks. This facility was taken out on 1 August 2017 and has an initial term of
five years with the option to extend the term twice, by one year, up to a maximum of seven years. On 1 August 2019 the second one year
option was exercised to extend the facility to 2024. The financial covenants associated with the facility are ‘net debt to EBITDA of less
than 3.0 times’ (FY20: 3.0 times) and ‘interest cover greater than 4.0 times EBITDA’ (FY20: 4.0 times). Interest is charged at floating rates
at margins of between 1.05% and 1.15% (FY20: 1.05% and 1.15%) above the relevant reference rate, thus exposing the Group to cash flow
and interest rate risk. At 31 March 2021, the Group had available £346.9m (FY20: £146.6m) of undrawn committed borrowing facilities in
respect of which all conditions precedent had been met.
•
In FY21 the Group secured a £35m revolving credit facility with one bank. This facility was taken out on 20 November 2020 with
termination date of 19 November 2021. HomeServe has the option to extend the facility by 6 months, twice. The financial covenants
associated with the facility are the same as the £400m revolving credit facility. Interest will initially be charged at a floating margin of 1.5%
above the relevant reference rate, thus exposing the Group to cash flow and interest rate risk. At 31 March 2021, the Group had available
£35m of undrawn committed borrowing facilities in respect of which all conditions precedent had been met.
• The Group has a £50m revolving credit facility with one bank. This facility was taken out on 30 March 2020 with a termination date of 15
July 2024. The financial covenants associated with the facility are the same as the £400m revolving credit facility. Interest will initially be
charged at a floating margin of 1.15% above the relevant reference rate, thus exposing the Group to cash flow and interest rate risk. At 31
March 2021, the Group had available £40.6m of undrawn committed borrowing facilities in respect of which all conditions precedent
had been met.
• The Group has £282m of US Private Placements (FY20: £292m) consisting of: a combined £172m USD and GBP denominated notes
taken out in December 2018 at a weighted average interest rate of 4.25%; a £60m placement taken out on 6 March 2017 with a fixed
interest rate of 2.59% and a £50m placement taken out on 7 October 2015 with a fixed interest rate of 3.44%. These notes vary in maturity
from 7, 10 and 12 years from date of issue and the financial covenants are the same as the £400m revolving credit facility.
• The Group renewed a £25m (FY20: £25m) short term loan in FY21 through to July 2021. The financial covenants associated with the
facility are ‘net debt to EBITDA of less than 3.0 times’ (FY20: 2.0 times) and ‘interest cover greater than 4.0 times EBITDA’ (FY20: 4.0 times).
Interest is charged at floating rates at margins of 1.10% (FY20: 0.67%) above the relevant reference rate, thus exposing the Group to cash
flow and interest rate risk.
• The Group has a $5m facility in the USA, of which $2.6m/£1.9m (FY20: $0.2m/£0.2m) was drawn at 31 March 2021. The weighted
average interest rate was 1.5% (FY20: 1.5%).
The Group incepted new loan agreements during the year in the UK of £4.2m (FY20: £nil). The weighted average interest rate was 2.0%
(FY20: n/a).
The Group has complied with all covenant requirements in the current and prior year. Information about liquidity risk is presented in note
27. For the Group’s floating Revolving Credit Facilities (RCFs), the Group has started discussions with respective counterparties to amend the
agreements to reflect the cessation of LIBOR. For reference to GBP and USD LIBOR, the Group will begin a dialogue with counterparties in
FY22 to propose amendments to move from GBP/USD LIBOR to SONIA and SOFR respectively.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 175
Current liabilities
Non-current liabilities
Lease
liabilities
£m
Bank and
other loans
£m
Lease
liabilities
£m
Bank and
other loans
£m
Total
£m
Reconciliation of movements in liabilities arising from financing
At 1 April 2019
Proceeds from additional borrowings on existing facilities
Repayment of borrowings
Repayment of lease principal
Interest paid
Costs associated with new bank and other loans raised
Total changes from cash flows
Non-cash movements
Transition on adoption of IFRS 16
Foreign exchange
Interest expense
Additions
Disposals
Acquisition of subsidiaries
Transfers to/(from)
At 1 April 2020
Proceeds from new loans and borrowings
Proceeds from additional borrowings on existing facilities
Repayment of borrowings
Repayment of lease principal
Interest paid
Costs associated with new bank and other loans raised
0.5
—
—
(12.4)
(1.5)
—
39.7
—
(11.1)
—
(4.4)
—
(13.9)
(15.5)
11.5
0.5
0.5
3.2
(0.3)
0.8
11.3
14.1
—
—
—
(14.8)
(1.4)
—
—
0.3
4.6
—
—
—
11.2
40.3
—
—
(11.1)
—
(4.4)
—
Total changes from cash flows
(16.2)
(15.5)
Non-cash movements
Foreign exchange
Interest expense
Additions
Disposals
Acquisition of subsidiaries
Transfers to/(from)
Total changes from non-cash movements
Bank overdrafts included within bank and other loans
At 31 March 2021
(0.5)
0.4
2.6
(0.4)
1.6
11.1
14.8
—
12.7
(0.1)
5.2
0.9
—
0.8
0.4
7.2
22.0
54.0
0.7
336.4
377.3
—
—
—
—
—
—
41.1
0.6
1.0
11.5
(1.0)
2.6
(11.3)
45.2
—
—
—
—
—
—
—
(2.1)
1.0
3.9
(0.7)
2.4
(11.1)
(6.6)
—
206.6
(12.9)
—
(12.3)
(0.8)
180.6
—
9.9
13.1
—
—
11.8
(11.2)
206.6
(24.0)
(12.4)
(18.2)
(0.8)
151.2
52.6
11.3
19.2
14.7
(1.3)
15.2
—
540.6
640.2
243.4
243.4
27.1
27.1
(203.5)
(214.6)
—
(13.8)
(2.2)
51.0
(33.3)
15.1
3.3
—
3.5
(0.4)
(11.8)
(14.8)
(19.6)
(2.2)
19.3
(36.0)
21.7
10.7
(1.1)
8.3
—
3.6
—
22.0
38.6
579.8
685.1
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
176
Notes to financial statements
Year ended 31 March 2021
26. Leasing
Information about leases for which the Group is a lessee is presented below.
Right of use assets
Cost
Additions on transition to IFRS 16
Transfers from property, plant and equipment on transition to IFRS 16
Additions
Disposals
Acquisition of subsidiaries
Exchange movements
At 1 April 2020
Additions
Disposals
Acquisitions of subsidiaries
Exchange movements
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Transfers from property, plant and equipment on transition to IFRS 16
Charge for the year
Disposals
Exchange movements
At 1 April 2020
Charge for the year
Disposals
Exchange movements
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Properties
£m
Motor vehicles
£m
Other
£m
43.3
—
6.7
(1.0)
3.2
1.4
53.6
2.8
(1.6)
3.5
(3.0)
55.3
—
—
8.5
—
0.1
8.6
9.5
(0.6)
(0.8)
16.7
38.6
45.0
7.6
4.9
8.0
(0.7)
0.2
0.3
20.3
3.6
(1.1)
0.5
(0.7)
22.6
—
3.2
5.6
(0.4)
0.2
8.6
5.6
(1.0)
(0.5)
12.7
9.9
11.7
0.2
—
—
—
—
—
0.2
0.1
—
—
—
0.3
—
—
0.1
—
—
0.1
0.1
—
—
0.2
0.1
0.1
Total
£m
51.1
4.9
14.7
(1.7)
3.4
1.7
74.1
6.5
(2.7)
4.0
(3.7)
78.2
—
3.2
14.2
(0.4)
0.3
17.3
15.2
(1.6)
(1.3)
29.6
48.6
56.8
Amounts recognised in the consolidated income statement are disclosed in notes 5 and 9 respectively. A maturity analysis of the contractual
undiscounted cash flows associated with lease liabilities is provided in note 25. The total cash outflow for leases for the year ended 31 March
2021 was £16.2m (FY20: £13.9m), representing £14.8m (FY20: £12.4m) of principal repayments and £1.4m (FY20: £1.5m) of interest charges
on outstanding lease liabilities.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 177
27. Financial instruments
Classification
Aside from the financial instruments discussed under ‘financial instruments subsequently measured at fair value’ below, all other financial
assets and liabilities to which the Group is party are held at amortised cost and their carrying values approximate their fair values.
Financial instruments subsequently measured at fair value
Financial instruments that are measured subsequent to initial recognition at fair value are grouped into levels 1 to 3 based on the degree to
which the fair value is observable:
• Level 1 fair value measurements are those equal to quoted and unadjusted market prices in active markets for identical assets or liabilities
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the
asset or liability either directly or indirectly
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data.
The Group has no financial instruments with fair values that are determined by reference to Level 1 and there were no transfers of assets or
liabilities between levels during the year. There are no non-recurring fair value measurements. The Group held the following Level 2 and 3
financial instruments at fair value:
Level 2
Assets classified as fair value through other comprehensive income
Other investments (note 17)
Level 3
Assets classified as fair value through profit and loss
Other financial assets
Contingent consideration at fair value through profit and loss
Current liabilities
Non-current liabilities
2021
£m
2020
£m
12.9
5.6
1.2
17.0
12.8
—
0.9
10.5
The fair value of other investments has been determined by analysing the future outlook of the investee as well as reviewing valuations
associated with recent comparable market transactions. The fair value of contingent consideration liabilities has been determined using
forecasts of future performance of acquisitions discounted to present value. The movement in other investments versus the prior year
primarily relates to the £2.9m addition of the 20% interest retained in Groupe Maison.fr (see notes 16 and 17) and the fair value movement
recorded on the Group’s investment in a smart thermostat manufacturer (see note 17).
The table below presents a reconciliation of recurring Level 3 fair value measurements:
2021
2020
Other financial
assets
£m
Contingent
consideration
£m
Other financial
assets
£m
Contingent
consideration
£m
At 1 April
Additions (note 16)
Payments
Re-measurement adjustment related to
prior year acquisition
Unwinding of discount rate through the income statement
Transfer to trade and other payables 1
Other fair value re-measurement gain
Foreign exchange
At 31 March
—
1.2
—
—
—
—
0.1
(0.1)
1.2
11.4
20.4
(1.1)
1.0
0.6
(0.3)
—
(2.2)
29.8
—
—
—
—
—
—
—
—
—
—
13.2
(1.1)
—
0.2
—
(1.5)
0.6
11.4
1 Where the contingent consideration has become certain but has not been paid at the year end the balance has been transferred and recognised in trade and other payables.
The inputs used to derive the asset fair value are reviewed at least annually by the Directors as part of the valuation process. The variable
inputs most consequential to the final valuation of the instrument are the price of the underlying equity and the expected volatility. If the
underlying price of the equity was higher/lower by 10%, then the carrying amount would increase by £0.3m/decrease by £0.2m. If the
volatility assumption increased/decreased by 10%, then the carrying amount would increase/decrease by £0.1m.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
178
Notes to financial statements
Year ended 31 March 2021
27. Financial instruments (continued)
Financial instruments subsequently measured at fair value (continued)
If discount rates on contingent consideration were higher/lower than the Group’s historical experience by 10%, the carrying amount would
decrease/increase by £0.1m (FY20: £0.3m). The undiscounted range of outcomes associated with the contingent consideration payments
has a floor of £1.6m (FY20: £1.8m). Payments above the floor vary based on a range of conditional performance metrics, for example a
percentage commission based on the future revenues associated with certain products of an acquired business over a defined period.
Year ended 31 March 2021
HomeServe France Holding SAS (“HFH”) call option over equity in Maison.fr
As a result of the disposal of an 80% interest in HomeServe Home Experts SAS (subsequently renamed Groupe Maison.fr), HFH acquired
a call option exercisable in April 2022 which provides the opportunity to acquire a further 24.17% equity stake of Groupe Maison.fr SAS for
a fixed price of €3.7m/£3.3m. The option has been fair valued using a Black-Scholes option pricing model. The assumptions used in the
model are as follows:
• The price of the underlying equity (determined by discounting future forecast cash flows of the business to present value)
• The exercise price of the option
• The risk-free rate
• The life of the option
• The expected volatility of the share price/equity
• Expected dividends.
The fair value of the option at initial recognition was £1.2m. For the period from initial recognition to 31 March 2021 the change in fair value,
before the impact of foreign exchange, was £0.1m.
Eneco Belgium NV call option over equity in HomeServe Belgium
On 27 January 2021 HomeServe France Holding SAS wrote a call option giving an unrelated third party, Eneco Belgium NV ('Eneco'), the
ability to acquire 50% of the equity in HomeServe Belgium SRL, a wholly owned subsidiary of HFH, at any time between the first and third
anniversaries of the signing date of the call option agreement. At 31 March 2021 the Group have compared the forecast exercise price to
Eneco throughout the exercise period to the forecast fair value of 50% of the equity in HomeServe Belgium SRL and concluded that the
option has no significant fair value at the balance sheet date.
Year ended 31 March 2020
During the period between acquisition on 25 July 2019 and 31 March 2020 a significant revenue generating contract of Somgas Hogar S.L.,
a Group company, ceased. In light of these circumstances the fair value of the contingent consideration associated with the acquisition of
Somgas was reduced by £1.5m.
Capital risk management
The Group manages its capital to ensure that entities in the Group are able to continue as going concerns while maximising the return to
stakeholders through the appropriate balance of debt and equity. The capital structure of the Group consists of debt, which includes the
borrowings disclosed in note 25, cash and cash equivalents in note 21 and equity attributable to equity holders of the parent, comprising
issued capital, reserves and retained earnings as disclosed in notes 28, 29 and the Group Statement of Changes in Equity.
The table below presents quantitative data for the components the Group manages as capital:
Attributable to equity holders of the parent
Cash and cash equivalents
Bank and other loans
2021
£m
564.0
171.4
633.8
2020
£m
635.7
131.2
580.9
Certain of the entities in the Group are subject to externally imposed capital requirements from the Financial Conduct Authority. Where
such requirements exist, the Group manages the risk through the close monitoring of performance and distributable capital within the
entities impacted by the regulations. The Group has complied with all such arrangements throughout the current and preceding year.
Financial risk management objectives
The Group principally utilises cash and cash equivalents and bank and other loans for the purpose of raising finance for its operations. The
Group also has various other financial instruments such as trade receivables and trade payables which arise directly from its operations.
Financial risk management is overseen by the Board according to objectives, targets and policies set by the Board. Treasury risk
management, including management of currency risk, interest rate risk and liquidity risk is carried out by a central Group Treasury function
in accordance with objectives, targets and policies set by the Board. Treasury is not a profit centre and does not enter into speculative
transactions.
Classification of financial instruments
The Group’s financial assets and liabilities are disclosed in notes 20-23 and note 25. The main risks arising from the Group’s financial
instruments are interest rate risk, credit risk and liquidity risk. Foreign currency risk is minimised by the treasury borrowing approach set out in
note 25.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 179
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates primarily relates to the Group’s long-term debt requirements with
floating interest rates. The Group’s policy is to manage its interest rate risk using a mix of fixed and variable rate debts.
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken.
The following table demonstrates the sensitivity to a reasonably possible increase of 100bps in the cost of borrowing, with all other variables
held constant, of the Group’s profit before tax (through the impact on floating rate borrowings).
Increase in cost of borrowing
Reduction in profit before tax (£m)
2021
100bps
0.7
2020
100bps
2.6
Credit risk
Credit risk associated with trade receivables and accrued income contract assets is discussed in note 20. Credit risk related to cash and cash
equivalents is discussed in note 21.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Group’s Board which sets the framework for the management of the
Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining
adequate reserves and banking facilities and continuously monitoring forecast and actual cash flows. Included in note 25 are details of the
undrawn facilities that are available to the Group to reduce liquidity risk further, along with the weighted average interest rates paid on bank
and other loans.
The maturity profile of the Group’s financial liabilities based on contractual maturities, is provided in the table below. Interest is payable on all
bank and other loans. All cash flows are presented on an undiscounted basis.
2021
Under 2 months
Between 2 and 12 months
Between 1 and 2 years
Between 2 and 5 years
After 5 years
Total
2020
Under 2 months
Between 2 and 12 months
Between 1 and 2 years
Between 2 and 5 years
After 5 years
Total
Bank and
other loans
£m
Trade
payables
£m
Other
payables
£m
Deferred and
contingent
consideration
£m
Lease
liabilities
£m
Obligations
under put
options
£m
24.6
44.4
72.2
229.5
405.3
776.0
97.2
61.7
0.1
0.1
0.7
39.3
109.9
1.5
0.1
—
159.8
150.8
6.1
17.0
3.9
10.9
6.5
44.4
2.5
11.6
12.1
20.6
7.7
54.5
—
26.7
—
15.8
—
42.5
Bank and
other loans
£m
Trade
payables
£m
Other
payables
£m
Deferred and
contingent
consideration
£m
Lease
liabilities
£m
Obligations
under put
options
£m
2.5
49.7
16.1
404.2
213.4
685.9
98.0
57.5
—
—
—
27.5
130.2
0.6
0.1
1.0
0.8
5.8
6.4
8.3
9.0
155.5
159.4
30.3
2.0
12.9
12.4
26.2
9.8
63.3
—
—
23.8
18.9
—
42.7
Total
£m
169.7
271.3
89.8
277.0
420.2
1,228.0
Total
£m
130.8
256.1
59.3
457.7
233.2
1,137.1
The revolving credit facility is drawn down and associated interest is settled on a monthly basis. The principal is included in the above
maturity profile tables when the facility is due to expire.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 180
Notes to financial statements
Year ended 31 March 2021
28. Share capital
Issued and fully paid 336,045,030 ordinary shares of 2 9/13p each (FY20: 334,634,278)
2021
£m
9.1
2020
£m
9.0
The Company has one class of ordinary shares which carry no right to fixed income. Share capital represents consideration received or
amounts, based on fair value, allocated to LTIP and One Plan participants on exercise, or amounts, based on fair value of the consideration
for acquired entities. The nominal value was 2 9/13p per share on all issued and fully paid shares.
During the year from 1 April 2020 to 31 March 2021 the Company issued 1,410,752 shares with a nominal value of 2 9/13p creating share
capital and share premium with a combined value of £7.2m.
During the year from 1 April 2019 to 31 March 2020 the Company issued 2,143,901 shares with a nominal value of 2 9/13p creating share
capital and share premium with a combined value of £8.6m.
29. Reserves
Share premium
The share premium account represents consideration received or amounts, based on fair value, allocated to LTIP and One Plan participants
on exercise for authorised and issued shares in excess of the nominal value of 2 9/13p (FY20: 2 9/13p).
Share incentive reserve
The share incentive reserve represents the cumulative charges to income under IFRS 2 ‘Share-based payments’ on all share options and
schemes granted, net of share option exercises.
Currency translation reserve
The currency translation reserve represents the cumulative foreign currency translation movement on the assets and liabilities of the
Group’s international operations at year end exchange rates.
Investment revaluation reserve
The investment revaluation reserve represents the movement on revaluation of the Group’s fair value through other comprehensive income
investments disclosed in note 17.
Other reserves
The movement on other reserves during the current and preceding years is set out in the table below:
At 1 April 2019
Purchase of own shares
At 1 April 2020 and 31 March 2021
Capital redemption
reserve
£m
1.2
—
1.2
Merger
reserve
£m
81.0
—
81.0
Own shares
reserve
£m
—
(3.0)
(3.0)
Total other
reserves
£m
82.2
(3.0)
79.2
The capital redemption reserve arose on the redemption of 1.2m £1 redeemable preference shares on 1 July 2002.
Merger reserve
The merger reserve represents:
•
•
the issue on 6 April 2004 of 11.6m new shares relating to the acquisition of the minority interest held in the Group at that date. The
reserve reflects the difference between the nominal value of shares at the date of issue of 12.5p and the share price immediately
preceding the issue of 624.5p per share; and
the issue on 17 November 2017 of 1.2m new shares relating to the acquisition of Checkatrade. The reserve reflects the difference
between the nominal value of shares at the date of issue of 2 9/13p and the share price immediately preceding the issue of 838p per
share. The shares issued formed part of the consideration for the acquisition of the remaining 60% of the equity of Checkatrade (taking
the Group’s overall holding to 100%) and therefore qualify for merger relief.
The own shares reserve represents the cost of shares in HomeServe plc purchased in the market and held by the HomeServe plc Employee
Benefit Trust. The shares are held to satisfy obligations under the Group’s share option schemes and are recognised at cost. During the year
no shares (FY20: 249,975) were repurchased at a cost of £nil (FY20: £3.0m) to fulfil awards made under share incentive schemes. No shares
were transferred to individuals to satisfy awards (FY20: nil).
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 181
30. Non-controlling interests
Summarised financial information in respect of the Group’s non-controlling interests is set out below. In FY21 and FY20, this relates to the
21% non-controlling interest in eLocal USA Holdings LLC. The summarised financial information below represents amounts before intra-
group eliminations.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to owners of the Company
Non-controlling interests
31. Notes to the cash flow statement
Operating profit
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of acquisition intangible assets
Amortisation of other intangible assets
Amortisation of contract costs
Share-based payments expense
Share of equity accounted investees results
Fair value movements on options and contingent consideration
Costs of put options on non-controlling interests accrued over time
Loss on disposal of associate
Loss on disposal of subsidiary
Loss/(gain) on disposal of property, plant and equipment, intangible assets and contract costs
Non-exceptional impairment of goodwill, intangible assets and contract costs
Exceptional impairment charges and associated costs
Other exceptional items
Operating cash flows before movements in working capital
Increase in inventories
Increase in receivables
(Decrease)/increase in payables and provisions
Net movement in working capital
Cash generated by operations
Income taxes paid
Interest paid (inclusive of payments on lease liabilities)
Net cash inflow from operating activities
Notes
15
26
14
14
4
18
16
7
2021
£m
12.1
52.1
(14.7)
(3.5)
46.0
9.7
2021
£m
71.8
9.9
15.2
45.0
44.4
9.0
4.3
2.5
2.3
2.8
2.1
0.1
1.1
0.1
86.9
5.3
302.8
(0.8)
(20.0)
(4.3)
(25.1)
277.7
(35.1)
(19.6)
223.0
2020
£m
8.6
64.9
(18.5)
(4.6)
50.4
10.6
2020
£m
158.6
9.3
14.2
35.5
38.3
11.8
7.2
2.1
(1.5)
1.0
—
—
(0.8)
1.2
14.3
(6.7)
284.5
(1.0)
(46.3)
3.2
(44.1)
240.4
(30.2)
(18.2)
192.0
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
182
Notes to financial statements
Year ended 31 March 2021
32. Share-based payments
During the year ended 31 March 2021, the Group had three (FY20: four) share-based payment schemes, which are described below:
i) Long-Term Incentive Plan (‘LTIP’)
The LTIP provides for the grant of performance, matching and restricted awards. The vesting period is normally three years. Restricted
awards are not subject to performance conditions. Until July 2020, 75% of each performance and matching award was subject to an
Earnings Per Share performance condition and the remaining 25% was subject to comparative Total Shareholder Return performance.
From July 2020, for participants with Group roles, 50% of each performance award is subject to an Earnings Per Share performance
condition and 50% to comparative Total Shareholder Return performance. For business unit participants, 50% of each performance award is
subject to a Cumulative Profits Measure performance condition and the remaining 50% is subject to comparative Total Shareholder Return
performance. For Executives who participate in the matching element of the LTIP, from July 2020, 100% of each performance award is
subject to an Earnings Per Share performance condition and each matching award is subject to Total Shareholder Return performance.
ii) Special Value Creation Plan (‘SVCP’)
This Plan provides for the grant of performance awards with performance conditions related to particular business units. The performance
conditions include metrics such as EBIT, EBITDA, EBITA or household and customer targets. The vesting periods range from three and five
years from the date of grant.
iii) Save As You Earn Scheme (‘SAYE’)
The SAYE scheme was open to all UK employees and provides for an exercise price equal to the closing quoted market price on the day
before the date of grant, less a discretionary discount. The options can be exercised during a six month period following the completion of
either a three or five year savings period. There were no awards made in the year (FY20: nil) as the scheme is now closed.
iv) One Plan
One Plan is a share incentive scheme which is available to all employees. Since February 2021, for every partnership share purchased,
participants will receive (or have the right to receive) one free matching share. Prior to this for every two partnership shares purchased,
participants received (or had the right to receive) one free matching share. Matching shares are held in trust for a period of up to three years.
2021
Number
Outstanding at 1 April 2020
Granted
Lapsed
Forfeited
Exercised
Outstanding at 31 March 2021
Exercisable at 31 March 2021
LTIP
SVCP
One Plan
3,370,593
913,578
1,246,661
1,444,241
—
—
(56,769)
(550,565)
(1,237,902)
—
104,191
51,156
—
(14,806)
(34,917)
2,989,500
2,140,337
105,624
107,877
—
—
Exercise price of options outstanding at 31 March 2021
Weighted average remaining contractual life
Weighted average fair value of options granted
£0.00
2
£11.20
£0.00
3
£0.00
2
£12.95
£11.81
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021 183
LTIP
SVCP
One Plan
SAYE
2020
Number
Outstanding at 1 April 2019
Granted
Lapsed
Forfeited
Exercised
Outstanding at 31 March 2020
Exercisable at 31 March 2020
Weighted average exercise price (£)
Outstanding at 1 April 2019
Granted
Lapsed
Forfeited
Exercised
Outstanding at 31 March 2020
Exercisable at 31 March 2020
4,822,728
—
956,713
1,246,661
(7,526)
(309,596)
(2,091,726)
—
—
—
3,370,593
1,246,661
7,967
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
105,756
40,780
—
(14,432)
(27,913)
104,191
—
—
—
—
—
—
—
—
Exercise price of options outstanding at 31 March 2020
Weighted average remaining contractual life
Weighted average fair value of options granted
£0.00
2
£10.59
£0.00
£0.00
4
2
£11.99
£11.99
27,338
—
(1,879)
—
(25,459)
—
—
3.35
—
3.35
—
3.35
—
—
n/a
—
n/a
The weighted average share price at the date of exercise for share options exercised during the year was £12.96 (FY20: £11.72).
The estimated fair values are calculated by applying a Black-Scholes option pricing model for SVCP, SAYE and One Plan and in addition
Monte Carlo and Stochastic simulations for the LTIP. The assumptions used in the models (which are comparable to the prior year) are as
follows:
Input
Share price
Exercise price
Expected volatility
Option life
Expected dividends
Risk free interest rate
Assumption
Price at date of grant
Per scheme rules
22% - 35%
Per scheme rules
Based on historic dividend yield
0.0% - 1.0%
Levels of early exercises and lapses are estimated using historical averages. Volatility is calculated by looking at the historical share price
movements prior to the date of grant over a period of time commensurate with the remaining term for each award. In FY21 the Group
recognised an IFRS 2 charge of £4.3m (FY20: £7.2m) related to equity-settled share-based payment transactions.
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
184
Notes to financial statements
Year ended 31 March 2021
33. Retirement benefit schemes
Defined contribution schemes
The Group operates defined contribution retirement benefit schemes for all UK employees. The assets of the schemes are held separately
from those of the Group in funds under the control of trustees. In addition to the scheme in the UK, the Group operates a defined
contribution retirement benefit scheme for North American employees.
The total cost charged to income of £7.4m (FY20: £6.9m) represents contributions payable to the schemes by the Group at rates specified
in the rules of the schemes. At 31 March 2021, contributions of £0.9m (FY20: £0.8m) due in respect of the current reporting period had not
been paid over to the schemes.
Defined benefit schemes
Water Companies Pension Scheme (WCPS)
In the UK, the Group participates in a defined benefit scheme, the Water Companies Pension Scheme, which is closed to new members.
This is a sectionalised scheme and the Group participates in the HomeServe plc Section of the Scheme. The Section is administered by
a Trustee and is independent of the Group’s finances. Contributions are paid to the Section in accordance with the recommendations of
an independent actuary and must not fall below a minimum limit specified by the Trustee on actuarial advice as being required to provide
the benefits which if the scheme was terminated would be required to be paid to and in respect of the Section members. Each member’s
pension at retirement is related to their pensionable service and pensionable salary, and the weighted average duration of the expected
benefit payments from the Section is around 19 years (FY20: 18 years).
GMP equalisation
On 26 October 2018 a High Court case in the UK confirmed that Guaranteed Minimum Pensions (GMP) need to be equalised between
male and female pension scheme members. The Court did not specify the method to use to equalise GMP but did set out a number
of possible approaches. Prior to this date the Group had excluded GMP equalisation from the valuation of scheme liabilities. In FY19 an
allowance was made resulting in a past service cost of £0.1m being recorded. On 20 November 2020 the High Court concluded that
pension schemes should pay uplifts in respect of members who had transferred benefits out in the past (back to 17 May 1990), where those
benefits were not equalised in line with the 2018 judgement. An estimate of the potential costs of these uplifts has been recorded in the
income statement totalling £15,000.
The results of the actuarial valuation as at 31 March 2020 were updated to the accounting date by a qualified independent actuary in
accordance with IAS 19. Re-measurements are recognised immediately through other comprehensive income.
Key assumptions used:
Discount rate at 31 March
Consumer price inflation
Retail price inflation
Expected rate of salary increases
Future pension increases
Life expectancy of female aged 60 at balance sheet date
Life expectancy of male aged 60 at balance sheet date
2021
2.1%
3.0%
3.5%
3.0%
3.0%
29.2yrs
27.5yrs
Valuation at
2020
2.5%
1.9%
2.9%
1.9%
1.9%
29.0yrs
27.6yrs
Pensions accounting entries are subject to judgement and volatility, as the majority of the assets are held within instruments with quoted
market prices in an active market, whereas the present value of the obligation is linked to yields on AA-rated corporate bonds.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021
Financial statements
Notes to financial statements
185
The scheme exposes the Group to actuarial risks including interest rate risk, longevity risk, investment risk and inflationary risk. The following
table illustrates the sensitivity of the WCPS defined benefit obligation to some of the significant assumptions as at 31 March 2021, all other
things being equal:
Price inflation -1%
Price inflation +1%
Discount rate -1%
Discount rate +1%
Life expectancy -1 year
Life expectancy +1 year
Amounts recognised in the income statement in respect of the WCPS defined benefit scheme are as follows:
Current service cost and section expenses
Interest income
2021
£m
0.2
(0.3)
(0.1)
£m
(5.6)
7.3
8.0
(6.1)
(1.2)
1.2
2020
£m
0.1
(0.2)
(0.1)
The actual return on scheme assets was a gain of £4.0m (FY20: loss of £2.6m). The amount included in the balance sheet arising from the
Group’s obligations in respect of its WCPS defined benefit retirement scheme is as follows:
Present value of defined benefit obligations
Fair value of scheme assets
Surplus in scheme recognised in the balance sheet in non-current assets
2021
£m
(35.7)
44.0
8.3
The net asset recognised in the balance sheet has not been limited as the Group believes that a refund of the surplus assets would be
available to it following the final payment to the last beneficiary of the pension scheme.
Movements in the present value of WCPS defined benefit obligations were as follows:
At 1 April
Employer's part of the current service cost and section expenses
Interest cost
Actuarial losses/(gains) due to:
Changes in financial assumptions
Changes in demographic assumptions
Experience adjustments on benefit obligations
Benefits paid
At 31 March
Movements in the fair value of WCPS scheme assets were as follows:
At 1 April
Interest on Section assets
Actual return less interest on Section assets
Contributions from the employer
Benefits paid
At 31 March
2021
£m
27.1
0.2
0.7
8.5
0.1
(0.2)
(0.7)
35.7
2021
£m
37.4
1.0
4.0
2.3
(0.7)
44.0
2020
£m
(27.1)
37.4
10.3
2020
£m
31.1
0.1
0.7
(3.7)
—
(0.5)
(0.6)
27.1
2020
£m
37.5
0.9
(2.6)
2.2
(0.6)
37.4
The amount recognised outside the income statement in the statement of comprehensive income for FY21 is a loss of £4.4m (FY20: gain of
£1.6m). The cumulative amount recognised outside the income statement at 31 March 2021 is a loss of £8.4m (FY20: loss of £4.0m).
FINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
186
Notes to financial statements
Year ended 31 March 2021
33. Retirement benefit schemes (continued)
The analysis of the fair value of WCPS scheme assets at the balance sheet date was as follows:
Equity instruments
Diversified growth fund
Liability driven investment funds
Absolute return bonds
Cash
2021
£m
17.7
4.8
12.8
8.6
0.1
44.0
2020
£m
13.0
4.0
20.4
—
—
37.4
The majority of the assets are held within instruments with quoted market prices in an active market. The HomeServe plc Section of the
WCPS invests in BMO’s Real Dynamic Liability Driven Investment Fund which makes use of derivative instruments to leverage its assets to
more closely resemble the Scheme’s liability profile. The fund helps to hedge the Section’s interest rate and inflation risk which reduces the
volatility of the Section’s funding level.
The estimated amounts of contributions expected to be paid to the scheme during the forthcoming financial year is £2.3m (FY21: actual
£2.3m) plus any Pension Protection Fund levy payable.
Indemnité de Fin de Carrière (IFC)
In France, companies are legally obligated by the labour code to provide a retirement indemnity plan or ‘Indemnité de Fin de Carrière’. The
IFC meets the definition of a defined benefit plan under IAS 19. Upon retiring, employees receive an end of career indemnity paid by their
last employer with conditions governed by a collective agreement of each labour sector, or, in the absence of a collective agreement, by the
French Law (article L. 122-14-13 al.2 of labour code). The Group’s IFC obligations are not supported by any scheme assets.
At each year end, the Group must measure its anticipated obligation by assessing for each employee of in scope entities, an estimation
of their date of departure, their expected gross wage as well as the estimated amount of benefits that will be paid to them. Actuarial
movements associated with the obligation are recognised through other comprehensive income with all other movements recognised in
the income statement.
Re-measurement of the Group’s IFC obligations was performed at 31 March in accordance with IAS 19 using the following assumptions:
Key assumptions used:
Discount rate at 31 March
Employer social charges
Employee turnover rate
Expected rate of salary increases
Mortality rates
Legal retirement age
0.7%
37 - 55%
14.2%
1.0 - 1.5%
INSEE 2019
60 -67yrs
Valuation at
2021
2020
1.2%
37% - 55%
14.2%
1.0 - 2.0%
INSEE 2018
60 - 67yrs
The following table illustrates the sensitivity of IFC obligations to reasonably possible changes in discount rates at 31 March 2021, all other
things being equal:
Discount rate -0.5%
Discount rate +0.5%
£m
0.1
(0.1)
In both FY21 and FY20 amounts recognised in the income statement, within operating costs, in respect of the IFC schemes were £0.1m,
principally related to current service costs.
Financial statementsNotes to financial statementsHomeServe plc Annual Report & Accounts 2021
187
Movements in the present value of IFC defined benefit obligations were as follows:
At 1 April
Employer’s part of the current service cost
Acquisition of subsidiaries
Actuarial losses due to changes in financial assumptions
Foreign exchange
At 31 March
2021
£m
1.0
0.1
0.1
0.1
(0.1)
1.2
2020
£m
0.9
0.1
—
—
—
1.0
In FY20 the carrying value of IFC obligations were recorded within trade and other payables – non-current on the balance sheet.
The amount recognised outside the income statement in the statement of comprehensive income for FY21 is a loss of £0.1m (FY20: £nil).
The cumulative amount recognised outside the income statement at 31 March 2021 is a loss of £0.1m (FY20: £nil).
The estimated amounts of contributions expected to be paid to the scheme during the forthcoming financial year is £nil (FY21 actual: £nil).
34. Related party transactions
The Group consists of a parent Company, HomeServe plc, incorporated in England and Wales, and a number of subsidiaries and associates
held directly and indirectly by HomeServe plc, which operate and are incorporated internationally. Note 50 to the Company’s separate
financial statements lists details of the interests in subsidiaries and related undertakings. Transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the
Company and its subsidiaries are disclosed in the Company’s separate financial statements (note 50).
Transactions with equity accounted investees
Sales to associates
Purchases from associates
Sales to joint ventures
Purchases from joint ventures
Amounts owed to joint ventures
2021
£m
—
0.3
0.1
—
—
2020
£m
0.1
0.3
0.4
0.3
0.1
Transactions and balances principally relate to salaries, consultancy, contractor costs and marketing services.
Other related party transactions
During the year Group companies purchased services amounting to £nil (FY20: £0.3m) from companies that are not members of the
Group but that are related parties as they are controlled by or connected to Richard Harpin, Chief Executive of the Group and a Director of
the parent company of the Group. These services related to the use by the Group of private aircraft, including the provision of pilots and all
related operating costs that are controlled by the related parties. The provision of such services were made at arm’s length prices, which
were approved by the Remuneration Committee.
The specific companies that were subject to the transactions were Harpin Limited (FY21: £nil, FY20: £0.2m) and Centreline AV Limited (FY21:
£nil, FY20: £0.1m). Amounts outstanding to all these companies on 31 March 2021 amounted to £nil (FY20: £nil).
Remuneration of key management personnel
The remuneration of the Directors and members of the Executive Committee, who are the key management personnel of the Group, is set
out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration
of individual Directors is provided in the audited part of the Remuneration report.
Short-term employee benefits
Post-employment benefits
Other long-term employee benefits
Share-based payments expense
Termination benefits
Except as noted above, there were no other transactions with Directors requiring disclosure.
35. Post balance sheet events
There have been no post balance sheet events identified since the year end.
2021
£m
12.2
0.4
1.5
1.3
4.4
19.8
2020
£m
8.4
0.3
—
5.6
—
14.3
Financial statementsNotes to financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
188 Financial statements
Company statement of comprehensive income
Company statement of comprehensive income
Year ended 31 March 2021
Profit for the year
Items that will not be reclassified subsequently to profit and loss:
Actuarial (loss)/gain on defined benefit pension scheme
Deferred tax credit/(charge) relating to actuarial re-measurements
Total other comprehensive (expense)/income
Total comprehensive income for the year
Notes
33
43
2021
£m
90.7
(4.4)
0.8
(3.6)
87.1
2020
£m
80.0
1.6
(0.3)
1.3
81.3
HomeServe plc Annual Report & Accounts 2021 Company balance sheet
31 March 2021
Non-current assets
Other intangible assets
Property, plant and equipment
Right of use assets
Investment in subsidiaries
Amounts receivable from Group Companies
Retirement benefit assets
Current assets
Trade and other receivables
Current tax asset
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Bank and other loans
Lease liabilities
Net current assets
Non-current liabilities
Bank and other loans
Lease liabilities
Deferred Tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Merger reserve
Share incentive reserve
Capital redemption reserve
Retained earnings
Total equity
Financial statements
Company balance sheet
189
2021
£m
3.0
0.5
1.3
954.6
4.9
8.3
972.6
72.8
1.7
25.4
99.9
2020
£m
2.7
0.6
1.6
909.6
—
10.3
924.8
38.1
—
60.9
99.0
1,072.5
1,023.8
(15.8)
—
(39.1)
(0.5)
(55.4)
44.5
(577.8)
(0.9)
(0.3)
(579.0)
(634.4)
438.1
9.1
196.4
81.0
16.5
1.2
133.9
438.1
(11.0)
(3.3)
(40.1)
(0.4)
(54.8)
44.2
(540.3)
(1.1)
(0.1)
(541.5)
(596.3)
427.5
9.0
189.3
81.0
19.8
1.2
127.2
427.5
Notes
38
39
45
40
40
33
41
41
42
44
45
44
45
43
28
29
29
47
29
As provided by s408 of the Companies Act 2006, the Company has not presented its own income statement. The Company’s profit for the
year was £90.7m (FY20: £80.0m).
The financial statements of HomeServe plc were approved by the Board of Directors and authorised for issue on 18 May 2021. They were
signed on its behalf by:
David Bower
Chief Financial Officer
18 May 2021
Registered in England No. 2648297
FINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
190 Financial statements
Company statement of changes in equity
Company statement of changes in equity
Year ended 31 March 2021
Balance at 1 April 2020
Profit for the year
Other comprehensive expense
Total comprehensive income
Dividends paid (note 11)
Issue of share capital
Share-based payments
Share options exercised
Tax on exercised share options
Deferred tax on share options
Balance at 31 March 2021
Year ended 31 March 2020
Balance at 1 April 2019
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends paid (note 11)
Issue of share capital
Share-based payments
Share options exercised
Tax on exercised share options
Deferred tax on share options
Balance at 31 March 2020
Share
capital
£m
Share
premium
account
£m
Merger
reserve
£m
Share
incentive
reserve
£m
Capital
redemption
reserve
£m
9.0
189.3
81.0
19.8
1.2
—
—
—
—
0.1
—
—
—
—
—
—
—
—
7.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3.8
(7.1)
—
—
—
—
—
—
—
—
—
—
—
Retained
earnings
£m
127.2
90.7
(3.6)
87.1
Total
equity
£m
427.5
90.7
(3.6)
87.1
(80.5)
(80.5)
—
—
—
0.5
(0.4)
7.2
3.8
(7.1)
0.5
(0.4)
9.1
196.4
81.0
16.5
1.2
133.9
438.1
Share
capital
£m
Share
premium
account
£m
Merger
reserve
£m
Share
incentive
reserve
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
9.0
180.7
81.0
21.2
1.2
118.6
—
—
—
—
—
—
—
—
—
—
—
—
—
8.6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7.2
(8.6)
—
—
—
—
—
—
—
—
—
—
—
80.0
1.3
81.3
(73.5)
—
—
0.1
1.0
(0.3)
Total
equity
£m
411.7
80.0
1.3
81.3
(73.5)
8.6
7.2
(8.5)
1.0
(0.3)
9.0
189.3
81.0
19.8
1.2
127.2
427.5
HomeServe plc Annual Report & Accounts 2021
Company cash flow statement
Year ended 31 March 2021
Net cash (outflow)/inflow from operating activities
Investing activities
Interest received
Dividends received from subsidiary undertakings
Purchases of intangible assets
Purchases of tangible assets
Investment in subsidiary undertaking
Net cash inflow/(outflow) from investing activities
Financing activities
Dividends paid
Proceeds on issue of share capital
Repayment of lease principal
Purchase of own shares
New bank and other loans raised
Costs associated with new bank and other loans raised
Proceeds from loans and borrowings
Repayment of loans and borrowings
Net cash (used in)/generated by financing activities
Notes
48
11
29
45
44
44
44
44
Net movement in cash and cash equivalents, net of bank overdrafts
Cash and cash equivalents, net of bank overdrafts at the beginning of the year
Effect of foreign currency exchange rate changes
Cash and cash equivalents, net of bank overdrafts, at the end of the year
41
Financial statements
Company cash flow statement
191
2021
£m
(77.9)
1.4
99.8
(0.4)
(0.1)
(45.0)
55.7
(80.5)
—
(0.4)
—
247.6
(2.2)
27.1
(213.3)
(21.7)
(43.9)
60.9
(0.1)
16.9
2020
£m
419.2
14.1
114.0
(2.2)
(0.6)
(715.0)
(589.7)
(73.5)
0.1
(0.3)
(3.0)
—
(0.8)
204.3
(11.0)
115.8
(54.7)
117.4
(1.8)
60.9
FINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
192
Notes to Company financial statements
Year ended 31 March 2021
Company only
The following notes 36 to 50 relate to the Company only position and performance for the Year ended 31 March 2021.
36. Significant accounting policies
As provided by s408 of the Companies Act 2006, the Company has not presented its own income statement. The Company’s profit for the
year was £90.7m (FY20: £80.0m).
The separate financial statements of the Company have been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are the same as those
set out in note 2 to the consolidated financial statements except that investments in subsidiaries are stated at cost less impairment.
Furthermore, included within amounts receivable from Group companies are amounts advanced to the HomeServe plc Employee Benefit
Trust for the purchase of shares. The shares held of 249,975 (FY20: 249,975) are in trust to satisfy obligations under share options schemes
and are recognised at cost £3m (FY20: £3m).
None of the critical accounting judgements and key sources of estimation uncertainty disclosed in note 3 apply to the Company except for
the key source of estimation uncertainty relating to retirement benefit obligations, refer to note 3 for more details. Other than the key source
of estimation uncertainty relating to retirement benefit obligations, there are no other critical accounting judgements or key sources of
estimation uncertainty.
37. Other information
Staff remuneration
The average monthly number of employees (including Executive Directors) was:
UK (all administrative roles)
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs (note 33)
Audit fees
Fees payable to the Company’s auditor for the audit of the Company’s
financial statements
Total audit fees
2021
number
91
2021
£m
12.3
1.6
0.4
14.3
2021
£000
202
202
2020
number
81
2020
£m
10.7
1.3
0.4
12.4
2020
£000
153
153
Financial statementsNotes to Company financial statementsHomeServe plc Annual Report & Accounts 2021
193
Trademarks &
access rights
£m
Software
£m
Total
intangibles
£m
2.5
0.4
—
—
2.9
—
—
2.9
0.8
0.3
1.0
—
2.1
0.1
—
2.2
0.7
0.8
6.7
1.8
(3.2)
0.1
5.4
0.9
(0.3)
6.0
4.8
1.9
—
(3.2)
3.5
0.5
(0.3)
3.7
2.3
1.9
9.2
2.2
(3.2)
0.1
8.3
0.9
(0.3)
8.9
5.6
2.2
1.0
(3.2)
5.6
0.6
(0.3)
5.9
3.0
2.7
38. Other intangible assets
Cost
At 1 April 2019
Additions
Disposals
Transfers
At 1 April 2020
Additions
Disposals
At 31 March 2021
Accumulated amortisation
At 1 April 2019
Charge for the year
Impairment
Disposals
At 1 April 2020
Charge for the year
Disposals
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Financial statementsNotes to Company financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
194
39. Property, plant and equipment
Leasehold
improvements
£m
Computer
equipment
£m
Motor
Vehicles
£m
Total
tangible assets
£m
Cost
At 1 April 2019
Additions
Disposals
Transfers
At 1 April 2020
Additions
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Charge for the year
Disposals
At 1 April 2020
Charge for the year
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
0.3
0.4
(0.1)
—
0.6
—
0.6
0.2
0.1
(0.1)
0.2
0.1
0.3
0.3
0.4
0.4
0.1
(0.2)
(0.1)
0.2
0.1
0.3
0.3
—
(0.2)
0.1
0.1
0.2
0.1
0.1
—
0.1
—
—
0.1
—
0.1
—
—
—
—
—
—
0.1
0.1
0.7
0.6
(0.3)
(0.1)
0.9
0.1
1.0
0.5
0.1
(0.3)
0.3
0.2
0.5
0.5
0.6
40. Subsidiaries
Details of the Company’s subsidiaries at 31 March 2021, including the name, address, country of incorporation and proportion of ownership
interest is given in note 50
Investments in subsidiaries
Cost and net book value
At 1 April 2019
Additions
At 1 April 2020
Additions
At 31 March 2021
£m
194.6
715.0
909.6
45.0
954.6
The addition in the year of £45.0m (FY20: £715.0m) relates to an injection of capital of £45.0m (FY20: £715.0m) into HomeServe Enterprises
Limited. At each balance sheet date the Company reviews the carrying amount of the investment in HomeServe Enterprises Limited to
determine whether there is any indication of an impairment loss. Given that HomeServe Enterprises Limited owns directly or indirectly all
subsidiaries in the HomeServe plc Group, a comparison is made between the carrying value of the investment in HomeServe Enterprises
Limited and the market capitalisation of HomeServe plc. There has not been an impairment loss recorded in either the current or prior year.
Amounts receivable from Group Companies
Amounts receivable from Group Companies (note 50)
2021
£m
4.9
2020
£m
—
The amounts receivable from Group Companies of £4.9m (FY20: £nil) represents a long-term loan due from another Group company. In
determining the recoverability of the loan, the Company considers any change in the credit quality of the loan. No allowance for doubtful
debts is considered necessary based on prior experience and the Directors’ assessment of the current economic environment.
The Directors consider that the carrying amount of receivables approximates to their fair value.
Notes to Company financial statementsYear ended 31 March 2021Financial statementsNotes to Company financial statementsHomeServe plc Annual Report & Accounts 2021
41. Financial assets
Trade and other receivables
Amounts receivable from Group companies (note 50)
Other receivables
Prepayments and accrued income
195
2021
£m
71.5
1.1
0.2
72.8
2020
£m
36.6
0.8
0.7
38.1
Trade receivables
The Company has a policy for providing fully for those receivable balances that it does not expect to recover. This assessment has been
undertaken in accordance with the IFRS 9 expected credit loss model as explained more fully in note 20.
Ageing of past due but not impaired receivables:
Current
At 31 March
2021
£m
71.5
71.5
2020
£m
36.6
36.6
In determining the recoverability of a trade receivable, the Company considers any change in the credit quality of the trade receivable from
the date credit was initially granted up to the reporting date. The concentration of credit risk is mitigated through the close management and
regular review of performance of the subsidiary companies.
No allowance for doubtful debts is considered necessary based on prior experience and the Directors’ assessment of the current economic
environment.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet of £25.4m (FY20: £60.9m) comprise cash held by the Company and short-term bank
deposits with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value.
Cash and cash equivalents, net of bank overdrafts, in the cashflow of £16.9m (FY20: £60.9m) comprise cash held by the Company and
short-term bank deposits with an original maturity of three months or less and bank overdrafts. The carrying amount of these assets
approximates to their fair value.
42. Financial liabilities
Trade and other payables
Trade payables and accruals
Amounts payable to Group companies
Taxes and social security, excluding corporation tax
2021
£m
14.7
—
1.1
15.8
2020
£m
9.1
0.4
1.5
11.0
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period
taken for trade purchases is 9 days (FY20: 9 days).
The Directors consider that the carrying amount of trade payables approximates to their fair value.
Financial statementsNotes to Company financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
196
43. Deferred tax
The following are the major deferred tax assets/(liabilities) recognised by the Company and movements thereon:
Retirement benefit
obligations
£m
Share
schemes
£m
Timing
differences
£m
At 1 April 2019
Charge to income
Charge to equity
Charge to comprehensive income
At 1 April 2020
(Charge)/credit to income
Charge to equity
Credit to comprehensive income
At 31 March 2021
44. Bank and other loans
Bank loans
Due within one year
Bank and other loans
Due after one year
Total bank and other loans
(1.2)
(0.4)
—
(0.3)
(1.9)
(0.5)
—
0.8
(1.6)
2.0
(0.1)
(0.3)
—
1.6
(0.3)
(0.4)
—
0.9
0.2
—
—
—
0.2
0.2
—
—
0.4
2021
£m
39.1
39.1
577.8
577.8
616.9
Total
£m
1.0
(0.5)
(0.3)
(0.3)
(0.1)
(0.6)
(0.4)
0.8
(0.3)
2020
£m
40.1
40.1
540.3
540.3
580.4
Bank and other loans due in less than one year of £39.1m (FY20: £40.1m) include the short term loan of £25m, bank overdrafts of £8.5m and
other loans of £0.9m. The principal features of these loans are set out in note 25.
Bank and other loans due after more than one year comprise of the drawn loans from the revolving credit facility, the US Private Placements
and other loans. The principal features of these loans are set out in note 25.
The weighted average of interest rates paid are set out in note 25.
Notes to Company financial statementsYear ended 31 March 2021Financial statementsNotes to Company financial statementsHomeServe plc Annual Report & Accounts 2021
Reconciliation of movements in liabilities arising from financing
Current liabilities
Bank and other loans
£m
Non-current liabilities
Bank and other loans
£m
At 1 April 2019
Proceeds from loans and borrowings
Repayment of loans and borrowings
Interest paid
Costs associated with new bank and other loans raised
Total changes from cash flows
Non-cash movements
Foreign exchange
Interest expense
Transfers to/(from)
At 1 April 2020
New bank and other loans raised
Proceeds from loans and borrowings
Repayment of loans and borrowings
Interest paid
Costs associated with new bank and other loans raised
Total changes from cash flows
Non-cash movements
Foreign exchange
Interest expense
Total changes from non-cash movements
Bank overdrafts included within bank and other loans
At 31 March 2021
39.7
—
(11.0)
(4.3)
—
(15.3)
0.2
4.5
11.0
40.1
0.9
—
(11.1)
(4.4)
—
(14.6)
(0.1)
5.2
5.1
8.5
39.1
334.9
204.3
—
(11.6)
(0.8)
191.9
12.1
12.4
(11.0)
540.3
246.7
27.1
(202.2)
(13.7)
(2.2)
55.7
(33.3)
15.1
(18.2)
—
577.8
197
Total
£m
374.6
204.3
(11.0)
(15.9)
(0.8)
176.6
12.3
16.9
—
580.4
247.6
27.1
(213.3)
(18.1)
(2.2)
41.1
(33.4)
20.3
(13.1)
8.5
616.9
Financial statementsNotes to Company financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 198
45. Leasing
The following disclosures about leases, for which the Company is a lessee, are presented in accordance with IFRS 16 for the year ended
31 March 2021.
Right of use assets
Cost
Additions on transition to IFRS 16
Additions
At 1 April 2020
Additions
Disposals
At 31 March 2021
Accumulated depreciation
Charge for the year
At 1 April 2020
Charge for the year
Disposals
At 31 March 2021
Carrying amount
At 31 March 2021
At 31 March 2020
Lease liabilities
Leases
Due within one year
Leases
Due after one year
Total lease liabilities
Properties
£m
Motor vehicles
£m
0.1
1.7
1.8
—
(0.2)
1.6
0.3
0.3
0.4
(0.1)
0.6
1.0
1.5
—
0.1
0.1
0.2
—
0.3
—
—
—
—
—
0.3
0.1
2021
£m
0.5
0.5
0.9
0.9
1.4
Total
£m
0.1
1.8
1.9
0.2
(0.2)
1.9
0.3
0.3
0.4
(0.1)
0.6
1.3
1.6
2020
£m
0.4
0.4
1.1
1.1
1.5
A maturity analysis of the contractual undiscounted cash flows associated with lease liabilities is provided in note 46. The total cash outflow
for leases for the year ended 31 March 2021 was £0.4m (FY20: £0.3m) representing £0.4m (FY20: £0.3m) of principal repayments and £nil of
interest charges in both years. Non cash movements on leases include additions of £0.2m (FY20: £1.8m) and interest expense of £0.1m (FY20:
£nil).
Notes to Company financial statementsYear ended 31 March 2021Financial statementsNotes to Company financial statementsHomeServe plc Annual Report & Accounts 2021 199
2021
£m
102.9
2021
£m
633.0
2020
£m
98.3
2020
£m
591.4
46. Financial instruments
The tables below set out the classification of financial instruments in the statement of financial position:
Financial assets
Amortised cost
Financial liabilities
Other financial liabilities at amortised cost
Principal financial instruments
The principal financial instruments used by the Company from which risk arises are as follows:
• cash and cash equivalents
• bank loans, revolving credit facilities, Private Placements and other loans
•
trade receivables
• other receivables
•
trade payables
• other payables
Capital risk management
The Company manages its capital to ensure that it is able to continue as a going concern while maximising the return to stakeholders
through the appropriate balance of debt and equity. The capital structure of the Company consists of debt, which includes the borrowings
disclosed in note 44, cash and cash equivalents disclosed in note 41 and equity comprising issued capital, reserves and retained earnings as
disclosed in this note and notes 28, 29 and the Company Statement of Changes in Equity.
The table below presents quantitative data for the components the Company manages as capital:
Shareholders’ funds
Cash and cash equivalents
Bank and other loans
2021
£m
438.1
25.4
616.9
2020
£m
427.5
60.9
580.4
Financial risk management objectives
The Company’s principal financial instruments comprise bank and other loans and cash and cash equivalents. The main purpose of these
financial instruments is to raise finance for the Company’s operations. The Company also has various other financial instruments such as
trade receivables and trade payables which arise directly from its operations.
The main risks arising from the Company’s financial instruments are interest rate risk, foreign currency risk and liquidity risk.
Interest rate risk
The Company’s exposure to the risk of changes in market interest rates primarily relates to the Company’s long-term debt requirements
with floating interest rates. The Company’s policy is to manage its interest cost using a mix of fixed and variable rate debts. The Company’s
exposure to interest rate risk is closely aligned to that of the Group, more details of which can be found in note 25.
Foreign currency risk
The Company has exposure to fluctuations in foreign currencies due to borrowings made to fund investments in its overseas subsidiaries
which are affected by foreign exchange movements.
The carrying amount of the Company’s foreign currency denominated monetary assets and monetary liabilities at the year end are set out
in the table below.
Euro
US dollar
Assets
Liabilities
2021
£m
37.3
6.7
2020
£m
16.8
9.8
2021
£m
(63.3)
(286.3)
2020
£m
(43.3)
(269.4)
Financial statementsNotes to Company financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
200
46. Financial instruments (continued)
The following table demonstrates the sensitivity to a reasonably possible change of 10% increase in sterling against the relevant foreign
currencies, with all other variables held constant, of the Company’s profit after tax and equity.
Increase in £:$ exchange rate:
Effect on profit after tax (£m)
Effect on equity (£m)
Increase in £:€ exchange rate:
Effect on profit after tax (£m)
Effect on equity (£m)
2021
10%
20.6
20.6
10%
1.9
1.9
2020
10%
19.1
19.1
10%
1.9
1.9
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Company’s Board which sets the framework for the management of
the Company’s short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by
maintaining adequate reserves and banking facilities and continuously monitoring forecast and actual cash flows. Included in note 25 are
details of the undrawn facilities that are available to the Company and the Group to further reduce liquidity risk.
The maturity profile of the Company’s financial liabilities is provided in the table below. The revolving credit facility is drawn down and
associated interest is settled on a monthly basis. The principal is included in the table below when the facility is due to expire. All cash flows
are presented on an undiscounted basis.
2021
Under 2 months
Between 2 and 12 months
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Total
2020
Under 2 months
Between 2 and 12 months
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Total
Lease liabilities
£m
Bank and
other loans
£m
Trade, other and group
payables
£m
—
0.5
0.5
0.5
—
1.5
10.6
43.6
70.7
229.0
405.2
759.1
5.5
9.2
—
—
—
14.7
Lease liabilities
£m
Bank and
other loans
£m
Trade, other and group
payables
£m
—
0.4
0.4
0.8
—
1.6
2.5
49.5
15.8
404.3
213.4
685.5
3.5
5.8
—
—
—
9.3
Total
£m
16.1
53.3
71.2
229.5
405.2
775.3
Total
£m
6.0
55.7
16.2
405.1
213.4
696.4
It is, and has been throughout the year under review, the Company’s policy that no speculative trading in financial instruments shall be
undertaken.
The following table demonstrates the sensitivity to a reasonably possible increase of 100bps in the cost of borrowing, with all other variables
held constant, of the Company’s profit before tax (through the impact on floating rate borrowings).
Increase in cost of borrowing
Reduction in profit before tax (£m)
2021
100bps
0.3
2020
100bps
2.4
Notes to Company financial statementsYear ended 31 March 2021Financial statementsNotes to Company financial statementsHomeServe plc Annual Report & Accounts 2021
47. Share incentive reserve
At 1 April 2019
Share-based payment charges in the year
Share options exercised in the year
At 1 April 2020
Share-based payment charges in the year
Share options exercised in the year
At 31 March 2021
48. Notes to the cash flow statement
Operating loss
Adjustments for:
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right of use assets
Exceptional charges
Amounts received from subsidiary undertakings for share incentive schemes
and other items
Share-based payment expense
Operating cash flows before movements in working capital
(Increase)/decrease in receivables
Decrease in payables
Movements in working capital
Cash used in operations
Income taxes (paid)/received
Interest paid
Net cash (outflow)/inflow from operating activities
201
£m
21.2
7.2
(8.6)
19.8
3.8
(7.1)
16.5
2020
£m
(24.0)
2.2
0.1
0.3
1.0
6.2
2.4
(11.8)
441.6
(0.7)
440.9
429.1
6.0
(15.9)
419.2
2021
£m
(23.2)
0.6
0.2
0.4
4.1
3.1
1.1
(13.7)
(43.2)
(2.6)
(45.8)
(59.5)
(0.3)
(18.1)
(77.9)
The reduction in working capital between FY20 (inflow £441.6m) and FY21 (outflow £43.2m) arises due to the repayment of intercompany
receivables in the prior year via a recapitalisation of subsidiary companies.
Financial statementsNotes to Company financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 202
49. Share-based payments
During the year ended 31 March 2021, the Company had three (FY20: three) share-based payment arrangements, which are described in
note 32.
2021
Number
Outstanding at 1 April 2020
Granted
Transfer
Forfeited
Exercised
Outstanding at 31 March 2021
Exercisable at 31 March 2021
Exercise price of options outstanding at 31 March 2021
Weighted average remaining contractual life
Weighted average fair value of options granted in 2021
2020
Number
Outstanding at 1 April 2019
Granted
Transfer
Lapsed
Forfeited
Exercised
Outstanding at 31 March 2020
Exercisable at 31 March 2020
Exercise price of options outstanding at 31 March 2020
Weighted average remaining contractual life
Weighted average fair value of options granted in 2020
LTIP
SVCP
One Plan
1,218,460
341,453
8,460
(5,137)
(369,430)
1,193,806
104,784
£0.00
2
£11.13
233,332
—
—
—
—
233,332
—
£0.00
3
N/A
7,012
3,234
1,513
(48)
(3,322)
8,389
—
£0.00
2
£11.79
LTIP
SVCP
One Plan
1,790,863
331,926
—
(3,216)
(160,880)
(740,233)
1,218,460
3,864
£0.00
2
£10.58
—
233,332
—
—
—
—
233,332
—
£0.00
4
£12.47
7,341
2,146
1,339
—
(511)
(3,303)
7,012
—
£0.00
1
£11.99
The weighted average share price at the date of exercise for share options exercised during the year was £12.98 (FY20: £11.77).
The estimated fair values are calculated by applying a Black-Scholes option pricing model for SVCP and One Plan and in addition Monte
Carlo and Stochastic simulations for the LTIP. The assumptions used in the models are set out in note 32.
In FY21 the Company recognised an IFRS 2 charge of £1.1m (FY20: £2.4m) related to equity-settled share-based payment transactions.
Notes to Company financial statementsYear ended 31 March 2021Financial statementsNotes to Company financial statementsHomeServe plc Annual Report & Accounts 2021 203
50. Related party transactions
During the year the Company purchased services amounting to £nil (FY20: £0.3m) from companies that are not members of the Group but
that are related parties as they are controlled by or connected to Richard Harpin, Chief Executive of the Group and a Director of the parent
company of the Group. These services related to the use by the Group of private aircraft, including the provision of pilots and all related
operating costs that are controlled by the related parties. The provision of such services were made at arm’s length prices, which were
approved by the Remuneration Committee.
The specific companies that were subject to the transactions were Harpin Limited (FY21: £nil, FY20: £0.2m) and Centreline AV Limited (FY21:
£nil, FY20: £0.1m). Amounts outstanding to all these companies on 31 March 2021 amounted to £nil (FY20: £nil). No guarantees have been
given or received.
In respect of transactions with subsidiaries of the Group, the Company provided goods of £nil (FY20: £nil), provided services of £9.5m (FY20:
£6.8m), lent monies to of £56.3m (FY20: £40.2m) and borrowed monies from of £nil (FY20: £nil). Amounts due to subsidiary companies
total £nil (FY20: £0.4m). Amounts owed by subsidiary companies total £76.4m (FY20: £36.6m) which principally relate to intercompany
loans receivable. The Company provided services of £nil (FY20:£0.1m) to associates during the year and £0.1m (FY20: £0.4m) to joint
ventures during the year. The Company purchased services of £nil (FY20: £0.3m) from joint ventures during the year. There are no amounts
outstanding in either year with associates and £nil outstanding (FY20: £0.1m) with joint ventures.
Provision of services to and the purchase of services from related parties were made at arm’s length prices. The amounts outstanding are
unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in
respect of the amounts owed by related parties.
Remuneration of key management personnel
The remuneration of the Directors and relevant members of the Executive Committee, who are the key management personnel of the
Company, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about
the remuneration of individual Directors is provided in the audited part of the Remuneration report.
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments expense
Except as noted above there were no other transactions with Directors requiring disclosure.
2021
£m
4.3
0.2
3.6
0.2
8.3
2020
£m
3.4
0.2
—
2.8
6.4
Financial statementsNotes to Company financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
204
50. Related party transactions (continued)
Interests held in related companies
All interests in the companies listed below are owned by HomeServe plc and all interests held are in the ordinary share capital. All
companies operate principally in their country of incorporation.
Name of legal entity
Directly held entities of HomeServe plc:
Place of
incorporation
ownership (or
registration)
and operation
Proportion
of voting
interest
and
power %
Activity
Registered address
HomeServe Enterprises Limited
Trading
England
100
Cable Drive, Walsall, WS2 7BN
Indirectly held entities of HomeServe plc:
Holding Companies
HomeServe Assistance Limited
Trading
England
HomeServe International Limited
Trading
England
HomeServe GB Limited (No. 5536994) 1
Dormant
England
HomeServe France Holding SAS
Trading
France
HomeServe Energy Services SAS
Trading
France
Mouse Holding SAS
HomeServe USA Holdings Corp
HomeServe Beteiligungs GmbH
Trading
France
Trading
USA
Trading
Germany
Sherrington Mews Limited (No. 09167024) 4
Trading
England
UK & Ireland
HomeServe Membership Limited
HomeServe Servowarm Limited (No. 560810) 4
Trading
Non-
Trading
England
England
HomeServe At Home Limited (No. 4186398) 1
Dormant
England
Vetted Limited
247999 Limited (No. 7183505) 1
Home Energy Services Limited (No. 8419975) 4
Trading
England
Dormant
England
Non-
Trading
England
HomeServe Manufacturer Warranties Limited (No. 4079068) 1
Dormant
England
HomeServe Heating Services Limited (No. 3468609) 4
Non-
Trading
England
HomeServe Trustees Limited (No. 3349817) 1
Dormant
England
HomeServe France Limited (No. 9469168) 4
Trading
England
HomeServe USA Limited (No. 9468635) 4
Trading
England
HomeServe Now Limited (No. 12523412) 4
HomeServe Europe Limited
HomeServe America Limited
Trading
Non-
Trading
Non-
Trading
England
Ireland
Ireland
HomeServe Gas Limited (No. 2248585) 1
Dormant
England
Home Service (GB) Limited (No. 3546370) 1
Dormant
England
Fastfix Plumbing and Heating Limited (No. 3120932) 1
Dormant
England
HomeServe Care Solutions Limited (No. 3228902) 1
Dormant
England
HomeServe Warranties Limited (No. 3156861) 1
Dormant
England
Multimaster Limited (No. 3670180) 1
Dormant
England
HomeServe Labs Limited 6
Help-Link UK Limited
Trading
England
Trading
England
100
100
100
100
100
20
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
9, rue Anna Marly, CS 80510, 69007 Lyon Cedex 7
9, rue Anna Marly, CS 80510, 69007 Lyon Cedex 7
73 Boulevard Hausmann, 75008 Paris
601 Merritt 7, Norwalk, CT 06851
Rheinstr. 30-32, 65185, Wiesbaden
Building 2000, Lakeside North Harbour, Western Road,
Portsmouth, PO6 3EN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Building 2000, Lakeside North Harbour, Western Road,
Portsmouth, PO6 3EN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
25-28 Adelaide Road, Dublin 2
25-28 Adelaide Road, Dublin 2
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
3310 Century Way, Thorpe Park,
Colton, Leeds, LS15 8ZB
Notes to Company financial statementsYear ended 31 March 2021Financial statementsNotes to Company financial statementsHomeServe plc Annual Report & Accounts 2021 205
Name of legal entity
Place of
incorporation
ownership (or
registration)
and operation
Proportion
of voting
interest
and
power %
Activity
Energy Insurance Services Limited
Trading
England
Aqua Plumbing & Heating Services Limited (No. 04121404) 4 5
Trading
England
Continental Europe
HomeServe SAS
Electro Gaz Service SA
ID Energies SAS
Sylvain Brun Froid SAS
Trading
France
Trading
France
Trading
France
Trading
France
HomeServe On Demand SAS
Trading
France
100
100
100
100
100
100
100
Registered address
Cable Drive, Walsall, WS2 7BN
Cable Drive, Walsall, WS2 7BN
9, rue Anna Marly, CS 80510, 69007 Lyon Cedex 7
17, rue Bavastro, 06300, Nice
ZA d’Armanville, route de la brique, 50700 Valognes
401 rue des Champagnes 73290 La Motte-Servolex
9, rue Anna Marly, CS 80510 , 69007 Lyon Cedex 7
Groupe Maison.fr SAS (formerly HomeServe Home
Experts SAS)
Trading
France
20
350 avenue JRGG de la Lauzière, 13290 Aix-en-Provence
Societe V.B. Gaz
Aujard SAS 5
Conviflamme SAS 5
Lesage SAS 5
Réseau Energies SAS 5
Trading
France
Trading
France
Trading
France
Trading
France
Trading
France
Société de Maintenance Thermique SAS 5
Trading
France
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1 rue George Sand, 94000 Creteil
37 Quater 1 route d'Hericy 77870 Vulaines sur Seine
Chemin des Carrières 14123 Fleury-sur-Orne
ZA d'Armanville secteur de prémesnil 50700 Valognes
Chemin des Carrières 14123 Fleury-sur-Orne
117 avenue du 8 mai 1945 42340 Veauche
41 route de la libération 69110 Ste Foy les Lyon
318 rue des digues, 14123 Fleury-sur-Orne
318 rue des digues, 14123 Fleury-sur-Orne
318 rue des digues, 14123 Fleury-sur-Orne
34, allée des Balmes, 38600 Fontaines
Square de Meeûs 38/40 1000 Bruxelles
Camino del Cerro de los Gamos 1, Parque empresarial –
Edificios 5 y 6, 28224 Pozuelo de Alarcon
Camino del Cerro de los Gamos 1, Parque empresarial –
Edificios 5 y 6, 28224 Pozuelo de Alarcon
Camino del Cerro de los Gamos 1, Parque empresarial –
Edificios 5 y 6, 28224 Pozuelo de Alarcon
c/ Rita Levi, Edificio Blue - Parc Bit CP 07121, Palma de
Mallorca, Baleares
Passeig Mallorca 17C, 07011 Palma de Mallorca
Rafael Alberti Nº 8, Zaragoza CP 50018
Paseo Can Feu Num14, 08205 Sabadell, Barcelona
Trading
France
Trading
France
Trading
France
Trading
France
Trading
France
Trading
Belgium
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Spain
Spain
Spain
Spain
Spain
Spain
Spain
G2M SAS 5
PH Energies SAS 5
PH9 SAS 5
Pack SD SAS 5
Roussin Energies SAS 5
HomeServe Belgium SRL
HomeServe Assistencia Spain SAU 2
HomeServe Spain SLU 2
Seguragua SAU 2
Habitissimo S.L. 2
Bit Advanced Marketing S.L. 2
Oscagas Hogar SLU 2
Somgas Hogar S.L. 2
Linacal S.L.U. 2
Trading
Spain
100
Polig. Las Labradas, C. Estella S/N. 31500 Tudela, Navarra
Tecno Arasat Servicios de Mantenimiento S.L. 2
Servicios Tecnicos Sate S.L. 2
Trading
Trading
Spain
Spain
Solusat Asistencia Tecnica S.L. 2 5
Trading
Spain
Servicio Tecnico Urueña S.L. 2 5
Trading
Spain
Aragonesa De Postventa S.L.U. 2 5
Trading
Spain
100
100
100
100
100
Calle Barón de eroles num. 31, 2400 Monzón, Huesca
Calle Anselmo Pie Sopena 1-Local 4, Esquina Avenida
Monegros No 31, Huesca
Avda Ingeniero Torres Quevedo 6, 28022 Madrid
Calle Orixe 54 48015 Bilbao,Vizcaya
Calle Centro, Nº 40 Parque Tecnologico Nave 40 50298
Pinseque, Zaragoza
Infocale Navarra S.L.U. 2 5
Trading
Spain
100
Plaza De Los Sauces, 2, Trasera 31010 Baranain, Navarra
Técnica del frío Landaluce S.L.U. 2 5
Trading
Spain
100
Calle Quinta (La) Num 29-A 39750 Colindres, Cantabria
Financial statementsNotes to Company financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 206
50. Related party transactions (continued)
Name of legal entity
Place of
incorporation
ownership (or
registration)
and operation
Proportion
of voting
interest
and
power %
Activity
Mantenimientos Holguín S.L.U. 2 5
Trading
Spain
Mesos Gestión y Servicios S.L. 2 5
Trading
Spain
Mesos Portugal, Unipessoal LDA 2 5
Trading
Portugal
Trading
Italy
Preventivi SRL 5
North America
HomeServe USA Corp
HomeServe USA Repair Management Corp
HomeServe USA Repair Management (Florida)
Leakguard Inc
Leakguard Repair Services Inc
Trading
Trading
Trading
Dormant
Dormant
HomeServe USA Repair Management Corp (Iowa)
Dormant
HomeServe USA Repair Management Corp (California)
Dormant
HomeServe USA Repair Management Corp (Virginia)
Dormant
HomeServe USA Repair Management Corp (Wisconsin)
Trading
HomeServe USA Energy Services LLC
HomeServe USA Energy Services (New England ) LLC
LI PH Enterprises LLC
NYC PH Enterprises LLC
SJESP Plumbing Services LLC
USP Holding 1 LLC
USP Holdings 2 LLC
Utility Service Partners Inc.
Utility Service Partners Private Label, Inc.
USP Water Heater Rentals LLC
Utility Service Partners Private Label of Virginia, Inc
Columbia Service Partners Inc
Service Line Warranties of America, Inc - Delaware.
Service Line Warranties of America, Inc - California.
Service Line Warranties of Canada Holdings, Inc.
Columbia Service Partners of Pennsylvania, Inc
Columbia Service Partners of Kentucky, Inc.
Columbia Service Partners of Ohio, Inc.
Columbia Service Partners of West Virginia, Inc.
Service Line Warranties of Canada Inc.
HomeServe HVAC LLC
Gregg Mechanical Corp.
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Registered address
Plaza De Los Tilos S/N 31010 Baranain, Navarra
Avda Industria18 28820 Coslada, Madrid
Praça Duque De Saldanha 1, EDIF. Atrium, 4º
H-O.1069-244, Lisbon
Via Martiri di Bologna, 13, 76123 Andria
601 Merritt 7, Norwalk, CT 06851
1232 Premier Drive, Chattanooga, TN 37421
1232 Premier Drive, Chattanooga, TN 37421
601 Merritt 7, Norwalk, CT 06851
601 Merritt 7, Norwalk, CT 06851
601 Merritt 7, Norwalk, CT 06851
601 Merritt 7, Norwalk, CT 06851
601 Merritt 7, Norwalk, CT 06851
601 Merritt 7, Norwalk, CT 06851
500 Bi-County Blvd, Farmingdale, NY 11735
5 Constitution Way, Woburn, MA 01801
1307 Manatuck Blvd, Bay Shore, NY 11706
4295 Arthur Kill Rd, Staten Island, NY 10309
420 N. 2nd Road, Unit 1, Hammonton NJ 08037
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
49
49
90
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
100
100
601 Merritt 7, Norwalk, CT 06851
198 Pulaski Avenue, Staten Island, New York 10303
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Notes to Company financial statementsYear ended 31 March 2021Financial statementsNotes to Company financial statementsHomeServe plc Annual Report & Accounts 2021 207
Registered address
633 Broad Street, Elyria, Ohio 44035
8421 Hilltop Road, Fairfax, VA 22031
1839 S Alma School Rd, Mesa, AZ 85210
3530 Forest Lane, Dallas, TX 75234
25-B Chestnut St. Gaithersburg, MD 20877
24750 Lakeland Blvd., Euclid, OH 44132
1405 Avenue T. Grand Prairie, TX 75050
1100 East Hector Street, Suite 101,
Conshohocken, PA 19428
1100 East Hector Street, Suite 101,
Conshohocken, PA 19428
2300 East Lincoln Highway, Suite 317
Langhorne, PA 19047
24825 N 16th Ave #115, Phoenix, AZ 85085
630 20th St. N, Bessemer, AL 35020
6938 E. Parkway Norte Mesa, AZ 85212
Name of legal entity
Geisel Heating and Air Conditioning Inc.
Activity
Trading
Cropp-Metcalfe Air Conditioning and Heating Company
Trading
American Home Guardian Inc
Nations Preferred Home Warranty Inc
Fab Electric Inc
Newcore Inc
Crawford Services, Inc
eLocal Holdings LLC
eLocal USA LLC
HomeServe SEM LLC
Hays Cooling and Heating LLC 5
Worry Free Comfort Systems Inc 5
Arizona’s Dukes of Air LLC 5
Canyon State Air Conditioning & Heating LLC 5
Sterling Air Services LLC 5
Environmental Systems Associates, Inc 5
Asia
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Place of
incorporation
ownership (or
registration)
and operation
Proportion
of voting
interest
and
power %
100
100
100
100
100
100
100
79
79
100
100
100
100
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
100
13632 West Camino Del Sol, Sun City West, AZ 85375
100
100
7256 89th Place, Suite 101 & 103 Mesa, AZ 85212
9375 Gerwig Ln J, Columbia, MD 21046
HomeServe Japan Corporation 3
Trading
Japan
50
MH-KIYA BLDG. 12-1, Mikuracho Kanda,
Chiyoda-ku, Tokyo 101-0038 Japan
1 The Group has taken advantage of the exemption from audit of the dormant subsidiaries registered in England under s480 of the Companies Act 2006. The registered numbers of
the dormant subsidiaries are provided above.
2 These companies have a 31 December year end due to the statutory reporting requirements in Spain.
3 The Group includes equity accounted investments; please refer to note 18 for full details.
4 These companies qualify for an exemption to audit for non-dormant entities under the requirements of s479A of the Companies Act 2006. As such, no audit has been conducted for
these companies in the current financial year. The registered numbers of the audit exempt subsidiaries are provided above.
5 These companies were acquired during FY21. Please refer to note 16 for full details.
6 This company has a 30 September year end due to local management requirements.
Financial statementsNotes to Company financial statementsFINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 208 Financial statements
Five year summary
Five year summary
Continuing operations
Unaudited
External revenue
North America
UK
France
Spain
New Markets
Home Experts
External sales
Profit/(loss)
North America
UK
France
Spain
New Markets
Home Experts
Adjusted operating profit
Amortisation of acquisition intangibles
Certain transaction related costs
Exceptional items
Operating profit
Net interest
Profit before tax
2021
£m
2020
£m
2019
£m
506.4
330.2
132.6
195.7
—
139.8
1,304.7
105.0
72.5
35.6
17.7
(6.3)
(10.2)
214.3
(45.0)
(5.1)
(92.4)
71.8
(24.6)
47.2
429.5
365.1
111.8
154.1
—
71.8
333.4
384.4
104.6
140.8
—
40.4
1,132.3
1,003.6
85.4
81.0
33.8
20.1
(4.7)
(13.9)
201.7
(35.5)
—
(7.6)
158.6
(20.7)
137.9
67.6
66.0
33.3
17.7
(2.4)
(7.4)
174.8
(26.8)
—
4.6
152.6
(13.1)
139.5
2018
£m
282.1
357.7
100.0
141.3
—
18.6
899.7
48.6
61.1
31.5
16.6
(1.6)
(2.8)
153.4
(18.4)
—
—
135.0
(11.7)
123.3
2017
£m
227.8
319.3
91.1
130.2
16.6
—
785.0
21.2
63.2
27.1
13.3
(6.0)
—
118.8
(14.1)
—
—
104.7
(6.4)
98.3
HomeServe plc Annual Report & Accounts 2021
Financial statements
Glossary
209
Glossary
HomeServe uses a number of alternative performance measures (APMs) to assess the performance of the Group and its individual
segments. APMs used in this announcement address profitability, leverage and liquidity and together with operational KPIs give an indication
of the current health and future prospects of the Group.
Definitions of APMs and the rationale for their usage are included below with a reconciliation, where applicable, back to the equivalent
statutory measure.
Profitability
The Group uses adjusted operating profit, adjusted EBITDA, adjusted profit before tax and adjusted earnings per share as its primary profit
performance measures. These are non-IFRS measures which exclude the impact of the amortisation of acquisition intangible assets, certain
transaction related costs and exceptional items.
Exceptional items are those items that, in the judgement of the Directors, need to be disclosed separately by virtue of their size, nature or
incidence.
Acquisition intangible assets are calculated using the estimated and discounted incremental future cash flows resulting from the affinity
relationship or future policy renewals as appropriate, which will include the impact of the past actions of the former owners. These past
actions will include historical marketing and business development activity, including but not limited to, the staff and operational costs of
the business. In addition the specific construct of the policy terms and conditions and the current and expected future profitability to be
derived from the acquired business or asset is also a factor in determining the valuation of acquisition intangible assets.
Certain financial instruments which the Group becomes party to by virtue of its transactional activity (typically, but not limited to,
acquisitions and disposals) have the potential to create volatility that is not representative of the underlying performance of the business.
These include;
• Fair value movements on financial instruments generated from transaction related activity;
• Unwinding of discount on contingent financial instruments (including options); and
• Charges associated with put options over non-controlling interests.
The on-going service and operating costs incurred by the Group in managing the acquired businesses or assets, including but not limited
to print, postage, telephony, claims costs and overheads are recognised as operating costs within these adjusted measures in the reporting
period in which they are incurred. Certain transaction related costs do not include deal fees, financing charges on deferred consideration or
the market rate salaries and bonuses of employees who hold non-controlling interest puts. All these items are included within the Group’s
adjusted performance measures.
Accordingly, by excluding the amortisation of acquisition intangibles, exceptional items and certain transaction related costs from the
adjusted performance measures reported by the Group in each specific reporting period ensures that these measures only reflect the
revenue attributable to, and costs incurred by, the Group in managing and operating those businesses and assets at that time in each
reporting period and do not include the impact of the historical costs of the vendor or considerations of the future profits to be derived
from the acquired business or assets.
Moreover, excluding these items from the Group’s adjusted metrics provides for a consistent measure of underlying profitability on which to
assess the Group’s performance both period-on-period and relative to its peers.
FINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021
210 Financial statements
Glossary
Glossary
Reconciliations of statutory to adjusted profit measures
Total group
£million
Operating profit (statutory)
Exceptional items
Certain transaction related costs
Amortisation of acquisition intangibles
Adjusted operating profit
Operating profit (statutory)
Exceptional items
Certain transaction related costs
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of acquisition intangibles
Amortisation of other intangible assets
Amortisation of contract costs
Adjusted EBITDA
Profit before tax (statutory)
Exceptional items
Certain transaction related costs
Amortisation of acquisition intangibles
Adjusted profit before tax
Pence per share
Earnings per share (statutory)
Exceptional items and certain transaction related costs (net of tax)
Amortisation of acquisition intangibles (net of tax)
Adjusted earnings per share
2021
71.8
92.4
5.1
45.0
214.3
71.8
92.4
5.1
9.9
15.2
45.0
44.4
9.0
2020
158.6
7.6
—
35.5
201.7
158.6
7.6
—
9.3
14.2
35.5
38.3
11.8
292.8
275.3
47.2
92.4
6.7
45.0
191.3
9.3
23.0
10.4
42.7
137.9
7.6
—
35.5
181.0
31.7
1.8
7.8
41.3
HomeServe plc Annual Report & Accounts 2021
Membership & HVAC – North America
Spain
New Markets Home Experts
Financial statements
Glossary
211
Membership & HVAC – EMEA
UK
338.9
(18.5)
—
—
87.8
3.2
91.0
n/a
72.5
21%
France
132.6
28.4
21%
—
—
7.2
7.2
195.7
14.7
8%
—
0.6
2.4
3.0
6ppts
1ppts
35.6
27%
17.7
9%
—
(10.0)
—
—
3.7
—
3.7
n/a
(6.3)
—
139.8
(25.0)
—
3.1
0.3
11.4
14.8
n/a
(10.2)
—
Membership & HVAC – EMEA
UK
372.9
62.8
17%
15.0
3.2
18.2
France
111.8
26.9
24%
—
6.9
6.9
5ppts
6ppts
81.0
22%
33.8
30%
Spain
New Markets
Home Experts
154.1
19.6
13%
—
0.5
0.5
—
20.1
13%
—
(0.9)
—
(3.8)
—
(3.8)
n/a
(4.7)
—
71.8
(17.4)
—
(3.6)
7.1
3.5
n/a
(13.9)
—
506.4
82.2
16%
2.0
—
20.8
22.8
5ppts
105.0
21%
429.5
67.6
16%
—
17.8
17.8
4ppts
85.4
20%
Segmental
2021
£m
Revenue
Statutory operating profit/(loss)
Operating margin %
Adjusting items
Certain transaction related costs
Exceptional items
Amortisation of acquisition intangibles
Total adjusting items
Effect on operating margin (ppts)
Adjusted operating profit/(loss)
Adjusted operating margin %
2020
£m
Revenue
Statutory operating profit/(loss)
Operating margin %
Adjusting items
Exceptional items
Amortisation of acquisition intangibles
Total adjusting items
Effect on operating margin (ppts)
Adjusted operating profit/(loss)
Adjusted operating margin %
Membership & HVAC – North America
FINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 212
Financial statements
Glossary
Glossary
2021
Local currency million
Revenue
Statutory operating profit/(loss)
Operating margin %
Adjusting items
Certain transaction related costs
Exceptional items
Amortisation of acquisition intangibles
Total adjusting items
Effect on operating margin (ppts)
Adjusted operating profit/(loss)
Adjusted operating margin %
Membership & HVAC – North America
Membership & HVAC – EMEA
UK
338.9
(18.5)
—
—
87.8
3.2
91.0
n/a
72.5
21%
France
148.5
31.8
21%
—
—
8.1
8.1
6ppts
39.8
27%
Spain
New Markets Home Experts
219.0
16.4
8%
—
0.7
2.7
3.4
1ppts
19.8
9%
—
(10.0)
—
—
3.7
—
3.7
n/a
(6.3)
—
139.8
(25.0)
—
3.1
0.3
11.4
14.8
n/a
(10.2)
—
665.8
107.9
16%
2.6
—
27.4
30.0
5ppts
137.9
21%
2020
Membership & HVAC – EMEA
Local currency million
Membership & HVAC – North America
Revenue
Statutory operating profit/(loss)
Operating margin %
Adjusting items
Exceptional items
Amortisation of acquisition intangibles
Total adjusting items
Effect on operating margin (ppts)
Adjusted operating profit/(loss)
Adjusted operating margin %
546.1
86.1
16%
—
22.5
22.5
4ppts
108.6
20%
UK
372.9
62.8
17%
15.0
3.2
18.2
France
128.4
31.2
24%
—
7.8
7.8
5ppts
6ppts
81.0
22%
39.0
30%
Spain
New Markets
Home Experts
176.6
22.5
13%
—
0.6
0.6
—
23.1
13%
—
(0.9)
—
(3.8)
—
(3.8)
n/a
(4.7)
—
71.8
(17.4)
—
(3.6)
7.1
3.5
n/a
(13.9)
—
HomeServe plc Annual Report & Accounts 2021 Financial statements
Glossary
213
Leverage
The Group targets net debt in the range of 1.0 to 2.0x adjusted EBITDA measured at the year end. The range reflects HomeServe’s relatively
low risk appetite. Due to the seasonality of the business and depending on M&A opportunities, HomeServe is able to operate outside 1.0
to 2.0x for periods of time but with a highly cash generative business model HomeServe will seek to return to its target range. The leverage
ratio is also important as it factors into the Group’s banking covenants and the rolling 12 month rate at each half year period influences the
future interest rates payable on the Group’s Revolving Credit Facility.
Certain of the Group’s segmental bonus measures relate to net cash. Net cash is defined and calculated in the same way as net debt but
returns a positive closing balance.
The 2021 Annual Report provides a full reconciliation of the movements in liabilities arising from borrowings and lease liabilities. The closing
balances at 31 March were as follows:
Current liabilities from borrowing and lease liabilities
Lease liabilities
Banks and other loans
Non-current liabilities from borrowings and lease liabilities
Lease liabilities
Bank and other loans
Total liabilities from borrowings and lease liabilities
Cash and cash equivalents
Net debt
Adjusted EBITDA
Leverage
2021
£m
12.7
54.0
66.7
38.6
579.8
618.4
685.1
2020
£m
14.1
40.3
54.4
45.2
540.6
585.8
640.2
(171.4)
(131.2)
513.7
292.8
509.0
275.3
1.8x
1.8x
FINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 214
Financial statements
Glossary
Glossary
Liquidity
Cash conversion % is defined as cash generated by operations divided by adjusted operating profit. The measure demonstrates the cash
generative nature of the ordinary trading operations of HomeServe’s business model and the ability to produce positive cashflows that can
be invested for future growth initiatives or in capital projects to maintain customer service initiatives, digital enhancements or efficiencies
that benefit the long-term health of the business.
Free cash flow is stated after capital expenditure, tax and interest obligations and is an indication of the strength of the business to generate
funds to meet its liabilities and repay borrowings. It also shows the funds that might be made available to pursue M&A activities and to pay
dividends.
Adjusted operating profit
Exceptional items
Certain transaction related costs
Amortisation of acquisition intangibles
Operating profit
Exceptional items
Certain transaction related costs
Depreciation and amortisation
Non-cash items
Increase in working capital
Cash generated by operations
Net interest and borrowing costs
Repayment of lease principal
Taxation
Capital expenditure - ordinary
Capital expenditure - acquisitions of policy books
Free cash flow
Adjusted operating profit
Cash generated by operations
Cash conversion
2021
£m
214.3
(92.4)
(5.1)
(45.0)
71.8
92.2
5.1
123.5
10.2
(25.1)
277.7
(21.7)
(14.8)
(35.1)
(71.1)
—
135.0
2021
£m
214.3
277.7
129%
2020
£m
201.7
(7.6)
—
(35.5)
158.6
7.6
—
109.1
9.2
(44.1)
240.4
(18.5)
(12.4)
(30.2)
(79.0)
(6.9)
93.4
2020
£m
201.7
240.4
119%
HomeServe plc Annual Report & Accounts 2021 Financial statements
Glossary
215
KPIs
The Group uses a number of operational key performance indicators that provide insight into past performance and are an indicator of the
future prospects of the Group as a whole and its individual segments.
Affinity partner households tracks the growth in addressable market delivered through existing and new partnerships with utilities and
municipals.
Customers tracks success in converting addressable market into revenue-generating customers, by delivering great products and service.
Retention rate reflects ability to deliver fit-for-purpose products and great service to customers.
Policies tracks ability to grow the product line through customer focus and innovation.
Income per customer measures ability to design and market increasingly valuable products, and sell them efficiently. Due to currency
differences, this measure is tracked at a geographic level. Income per customer is calculated as the last 12 months’ net policy income
divided by customers.
Trades are customers in the Home Experts business. Growing the network of vetted and reviewed trades will enable HomeServe to meet
consumer needs and grow its business.
Adjusted profit before tax is the profit measure we use to operationally manage the business and by which business growth, efficiency
and sustainability are monitored.
Net debt to EBITDA is the key cash ratio, which is used to monitor usage of financial resources within agreed risk parameters.
Customers
IFRS 15 defines a customer as ‘a party that has contracted with an entity to obtain goods or services’. In the Membership businesses where
the Group acts as an intermediary selling contracts and insurance policies to end consumers, the ‘IFRS 15 customer’ is considered to be the
underwriter with which the Group has contracted to sell policies.
This is different, however, from how the Group markets and communicates the value of its products and services to end consumers. Here,
the businesses' strategy and communications (both internally and externally) refer to the end consumer as the customer. As a result, for the
purposes of describing the strategy and operational performance of the business, the Business review and the Group’s KPIs refer to the end
consumer as the customer of the Group, rather than the underwriter. However, for the purposes of preparing the financial statements, the
accounting transactions are recorded in accordance with IFRS 15 where the customer is the underwriter.
For all other sources of revenue, it is the party that has contracted with the Group to obtain goods and services that is classified as the
customer. The following table summarises this position:
Revenue Stream
IFRS 15 ‘contracted’ customer
Customer as referred to in the
Business and Operating Reviews
Policy Income – insurance intermediary commissions
Underwriters
End user of the service
Policy Income – repairs
Underwriters or other B2B contracted parties
Policy Income – home assistance
Home Experts
HVAC
Other
End user of the service
FINANCIAL STATEMENTSHomeServe plc Annual Report & Accounts 2021 216
Financial statements
Shareholder information
Shareholder information
Financial calendar
2021
16 July
Annual General Meeting
2 August
Final dividend for the year ended
31 March 2021
16 November
Interim results for the six months
ending 30 September 2021
2022
January
May
Interim dividend for the year ending
31 March 2022
Preliminary results for the year ending
31 March 2022
June
2022 Annual Report & Accounts available
Shareholder helpline
HomeServe’s shareholder register is maintained by Computershare Investor Services PLC who are responsible for making dividend
payments and updating the register, including details of changes to shareholders’ addresses. If you have a query about your shareholding in
HomeServe, you should contact Computershare.
Tel: 0370 707 1053
Address: PO Box 82, The Pavilions, Bridgwater Road, Bristol, BS99 7NH
Website: www-uk.computershare.com/investor
homeserveplc.com
The HomeServe website provides news and details of the Company’s activities plus information for shareholders. The investor
section of the website contains real time and historical share price data as well as the latest results and announcements.
HomeServe plc Annual Report & Accounts 2021 A
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HomeServe plc
Registered Office:
Cable Drive, Walsall, WS2 7BN
Registered in England No. 2648297
Tel: 01922 426262
homeserveplc.com