Annual Report & Accounts 2022
Making home repairs and improvements easy
for homeowners and trades
HomeServe plc Annual Report & Accounts 2022
3
Every day, our people
serve our customers
with courage, persistence
and integrity, to make
home repairs and
improvements easy.
Thanks to the c.9,000 people
who now work for the
HomeServe family worldwide,
we are emerging from the
Covid-19 pandemic stronger
than ever.
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
1
Contents
Strategic report
2 At a glance
4 Chairman’s statement
6 Chief Executive’s review
10 Market overview
12 Business model and strategy
18 Key performance indicators
20 Responsible business
29 Task Force on Climate-related
Financial Disclosures
32 Principal risks and uncertainties
40 Operating review
52 Financial review
56 Section 172(1) statement
58 Viability statement
59 Going concern
60 Non-financial information statement
Governance
62 Corporate governance statement
62 Chairman’s overview
63 Compliance and other statements
66 Board leadership and company
purpose
69 Division of responsibilities
74 Composition, succession and
evaluation
74 Our Board
76 Our Executive Team
80 Nomination Committee report
82 People Committee report
84 Audit, risk and internal control
86 Audit & Risk Committee report
92 Directors’ remuneration report
92 Annual statement
93 Remuneration at a glance
97 Directors’ remuneration policy
106 Annual report on remuneration
121 Directors’ report
124 Statements of responsibilities
125 Independent Auditor’s report
Financial statements
138 Group financial statements
196 Company financial statements
Other information
217 Glossary
224 Shareholder information
Group performance
highlights
HomeServe emerged from the Covid-19 pandemic well
positioned across all three business divisions, with our key
profit measure - adjusted profit before tax - up 15% to £220.3m
(FY21: £191.3m). Statutory profit before tax increased by 271% to
£175.1m, driven by the absence of any exceptional charges, as
seen in the prior year, as well as good underlying growth.
Demand for our products and services remained strong as consumers continued to
spend more time and money at home. All of our businesses performed well, thanks to
our dedicated staff, contractors and partners. We are building innovative new capabilities
such as HVAC as a Service to deepen our relationships with our affinity partners and help
homeowners participate in the green homes revolution. We continue to expand our
geographic footprint, and now have businesses in Belgium, Portugal and Germany as
well as North America, the UK, France, Spain and Japan.
1 FY21 statutory operating profit and basic EPS after exceptional charge of £92.4m.
2 In light of the recommended cash offer for the Group announced on 19 May 2022, the Board is not
recommending a final dividend. The total dividend for the year therefore consists of the interim dividend of 6.8p
per share declared in November 2021.
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.
To view this report online,
go to homeserveplc.com
Statutory operating profit
£202.6m +182%
£202.6m
£71.8m1
FY22
FY21
Ordinary dividend per share
6.8p -74%
6.8p2
26.0p
FY22
FY21
Revenue
£1,429.3m +10%
£1,429.3m
£1,304.7m
FY22
FY21
Basic earnings per share
39.5p +327%
39.5p
9.3p 1
FY22
FY21
EMEA MEMBERSHIP
& HVAC
HOME
EXPERTS
NORTH AMERICAN
MEMBERSHIP & HVAC
Strategic report
HomeServe plc Annual Report & Accounts 2022
2
Statutory operating profit
£202.6m +182%
£202.6m
£71.8m1
FY22
FY21
HomeServe’s 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. We aspire to
be able to do every job, in
every home.
We run our business in three largely
autonomous divisions, which benefit
from shared expertise and experience.
Capital allocation decisions are made at
Group level, for the benefit of the business
as a whole.
We expect to achieve strong earnings
growth by sustaining our growth in
the under-penetrated North American
Membership & HVAC market; maintaining
and growing our Membership & HVAC
businesses in EMEA; and developing a
new business model in Home Experts.
Our Responsible business framework
spans our three divisions and defines
the way we work. We share expertise
in managing environmental, social and
governance risks. We are passionate
about contributing to positive change in
our industry – for example by promoting
environmentally friendly sources of
heating and cooling and creating trades
apprenticeships.
See page 20 Responsible business.
At a glance
NORTH AMERICAN MEMBERSHIP & HVAC
Strong, sustainable profit growth in an under-penetrated market;
our most exciting near term growth opportunity.
Our Membership policies give homeowners the peace of mind of knowing that they
have one number to call if they need assistance with plumbing, heating, electrics and
other core services. Our growing HVAC installation business gives us the opportunity to
participate in the green energy revolution, and help homeowners to transition to more
eco-friendly heating.
FY22 performance
North American Membership & HVAC delivered a strong financial performance,
with adjusted operating profit up 15% to $159.1m (FY21: $137.9m). The key driver of
revenue and profit growth was strong growth in policies (up 6% to 8.7m), as existing
customers upgraded their coverage in response to successful cross-sell marketing
and continued high levels of customer service. HomeServe’s HVAC buy and build
strategy is most advanced in North America, with a portfolio of 19 locally branded
companies acquired over the last four years. HVAC contributed $17.8m (FY21: $9.8m)
in adjusted operating profit for the year, and is a fundamentally important component
of our major initiatives to drive future growth in North America.
Revenue
$794.9m +19%
$794.9m
$665.8m
FY22
FY21
Adjusted operating profit
$159.1m +15%
$159.1m
$137.9m
FY22
FY21
See page 12 Business model and strategy.
Adjusted operating profit
£246.5m +15%
£246.5m
£214.3m
FY22
FY21
Group
Revenue
£1,429.3m +10%
£1,429.3m
£1,304.7m
FY22
FY21
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
3
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
3
EMEA MEMBERSHIP & HVAC
Established, cash-generative businesses in the UK, France and
Spain with innovation to fuel future growth; new businesses
launched in Portugal, Belgium and Germany; exciting joint
venture in Japan.
The UK is our most established Membership business. We have a 2-3 year transformation
plan to stabilise our UK business and return it to profitable growth. We are rolling out
our successful HVAC buy and build strategy, seeking to partner more with energy utilities
and expanding into Claims Assistance with the acquisition of CET Structures Ltd in
October 2021.
In France and Spain, we have already diversified into multi-product, multi-channel
businesses to support stable, profitable growth.
Our near neighbour geographic expansion strategy leverages our know-how in existing
markets to develop new opportunities in Belgium, Portugal and Germany. Our Japanese
joint venture is developing well.
FY22 performance
In the UK, there was good early progress on the business’s transformation plan.
Adjusted operating profit ended the year up 1% at £72.9m (FY21: £72.5m), customer
numbers were in line with expectations at 1.5m (FY21: 1.6m) and policy retention
was up for the first time in seven years to 79% (FY21: 78%). In our French business, we
continue to make good progress, with adjusted operating profit up 8% to €43.0m
(FY21: €39.8m) and a growing customer base, thanks to strong partnerships with water
utilities and innovative digital relationships with home moving aggregators and price
comparison websites. In our Spanish business, adjusted operating profit growth of
24% to €24.6m (FY21: €19.8m) was driven by good progress in Claims Assistance in
Spain and Portugal, and in HVAC, where our Iberian businesses have a strong policy
component and therefore have attractive recurring revenue characteristics.
HOME EXPERTS
Highest potential growth in
the long-term.
With Checkatrade in the UK, Habitissimo
in Iberia and Italy, and eLocal in North
America, our Home Experts platforms
match homeowners with quality trades,
on demand and online, to get jobs done
well. Home Experts covers a much
broader range of home repairs and
improvements than Membership, from
landscape gardening to carpet cleaning.
FY22 performance
Home Experts achieved the key
milestone of divisional profitability
this financial year, generating £4.3m
of adjusted operating profit (FY21:
£(10.2)m). The principal driver of
this improvement was a much lower
adjusted operating loss at Checkatrade,
which continued to strengthen its
position as the UK’s leading online
platform for matching homeowners
with quality trades.
Adjusted operating profit/
(loss)
£4.3m
£4.3m
(£10.2m)
FY22
FY21
Revenue
£155.2m +11%
£155.2m
£139.8m
FY22
FY21
Revenue
£698.5m +5%
£698.5m
£667.2m
FY22
FY21
Adjusted operating profit
£124.5m +4%
£124.5m
£119.5m
FY22
FY21
Strategic report
HomeServe plc Annual Report & Accounts 2022
4
Chairman’s statement
Tommy Breen
This is my first statement since I was
appointed Chairman of HomeServe in May
2021. I first came across HomeServe and
Richard Harpin while I was CEO of DCC
plc. With Richard’s presence as its Founder
and CEO, I realised the importance of
good chemistry, of a balanced, productive
relationship between the Chairman and
CEO, and of achieving clear recognition
of the respective responsibilities of the
Executives and Non-Executives on the
Board. It is a privilege and a pleasure to
have been entrusted with this role.
First impressions
As I have got to know HomeServe, I
find that it is driven by a clear sense of
purpose – to make home repairs and
improvements easy. HomeServe cares
passionately about its customers, its
partnerships and above all, its people.
Its culture is healthy and open – highly
commercial, no nonsense, but caring.
Doing business responsibly is part of
its DNA, particularly in its customer
relationships and the way it treats the
people it works with. It is at the beginning
of a journey to harness green energy, and
is working hard to develop opportunities
and manage risk in this vitally important
area. Richard has surrounded himself with
a strong executive team. While there is a
way to go to achieve the diversity metrics
expected of us as a public company, I am
impressed by the constructive diversity
of thought and the level of challenge the
team displays. The growth prospects of
the company are strong and sustainable.
See page 20 Responsible business.
In the course of this year, we reinforced
our view that the right way to run our
business is in three business divisions,
aligned by our common purpose. Each
division has autonomy to respond to the
needs of its individual markets, and has
access to the shared resources, experience
and expertise available across the Group.
Capital allocation decisions are taken at
Group level, and our target is for all of our
investments to deliver double our cost of
capital. I am particularly impressed with
the way capital is being deployed globally
to build our HVAC business: the rates of
return available to us in this growing, green
space are exemplary. Group ROIC (return
on invested capital) this year was 15%. This
measure will be added as a component of
Executive Director reward from July 2022,
reflecting my belief that a real focus on
how we deploy our capital is an excellent
way to deliver shareholder value in the
medium-term.
We aim to deliver strong, consistent
earnings growth, and expect to achieve
this by sustaining good growth in the
under-penetrated North American
Membership & HVAC market; maintaining
and growing our Membership & HVAC
businesses in EMEA; and developing a
market-leading business model in
Home Experts.
See page 12 Business model and strategy.
Turbulent market backdrop
As for most companies, this has been a
tumultuous period. All of our businesses
are emerging from the Covid-19
pandemic on different timetables, and
all have had to manage a return to
office-based working and continued
disruption to supplier interaction. On top
of this came a catalogue of geo-political
and economic events which present
major issues for homeowners globally:
significant inflationary pressure, cost of
living rises and the fuel crisis; skills and
materials shortages; and more urgent
focus on climate change.
See page 10 Market overview.
Resilient business model and
clear strategy
In the face of these pressures,
HomeServe’s business model proved
resilient and our strategy enabled us to
continue to make progress. As we had
planned, we delivered improvements
across our strategic and financial KPIs.
Our key Group profit measure – adjusted
profit before tax – was up 15% to £220.3m
(FY21: £191.3m) and basic earnings per
share increased to 39.5p (FY21: 9.3p). In
our Membership businesses, customer
numbers held steady at 8.4m worldwide
(FY21: 8.4m) and policy retention was
up slightly at 84% (FY21: 83%). In Home
Experts, the number of paying trades on
Checkatrade grew 7% to 47k (FY21: 44k)
and average revenue per trade grew 31%
to £1,229 (FY21: £939).
“As part of my due diligence
for the role of Chairman,
I discovered an ambitious
company with an exciting
vision – to be the world’s
largest and most trusted
provider of home repairs and
improvements.”
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
5
The financial year in review
North American Membership & HVAC
delivered its seventh consecutive year
of double digit adjusted operating profit
growth, with adjusted operating profit
up 15% to $159.1m (FY21: $137.9m). The
business continues to expand its customer
propositions to drive further growth,
to help homeowners participate in the
green homes revolution and to align with
partners’ decarbonisation ambitions.
Across EMEA Membership & HVAC,
the division continued to deliver on its
transformation and growth agendas and
returned to profit growth, with adjusted
operating profit up 4% to £124.5m (FY21:
£119.5m). In the UK, there was good early
progress on the business’s transformation
plan, with customer numbers ending
the year at 1.5m (FY21: 1.6m), in line with
our expectations, and policy retention
up to 79% (FY21: 78%). France and Spain
performed well, with further good growth
in job volumes in the Spanish claims
handling business. HomeServe’s Japanese
joint venture is making good progress,
and now has access to 25% of households
through four electric utility partnerships.
As expected, the Home Experts division
was profitable for the first time on a
full year basis, thanks to a profitable
contribution from eLocal and progress
at Checkatrade, which continued to
strengthen its position as the UK’s leading
online platform for matching homeowners
with quality trades.
See page 40 Operating review.
The Board and its agenda
this year
HomeServe has an effective, experienced
Board. All three business divisions, plus
Group matters, are comprehensively
represented by our four Executive
Directors, with the addition of Ross
Clemmow ensuring that EMEA
Membership & HVAC is directly
represented. One of the main areas
identified for continuing development
in the FY21 Board evaluation was
improving the Non-Executive pipeline
with a specific focus on increased diversity.
Non-Executive recruitment was paused
to give me the opportunity to assess
the Board dynamic and consider skills
gaps and succession. An offer made to
a very suitable candidate in March 2022
coincided with Brookfield emerging as a
potential bidder for HomeServe, and was
not finalised.
Major items on the Board’s agenda
beyond standing items this year included
a review of the decision to halt investment
in our UK CRM system and detailed
consideration of lessons learnt. We also
made good progress on evaluating
climate risks and opportunities, and
agreed our Scope 3 carbon footprint
targets. Going forward, we are going
to combine our People and Corporate
Responsibility committees to form a new
Board-level committee, to accelerate
activity in all areas of our responsible
business strategy.
The Board’s time this year has been
carefully balanced between strategy and
governance. Our discussions positioned
us well to respond to the announcement
on 24 March 2022 that Brookfield was
considering a bid for HomeServe. As this
process plays out, the Board will act with a
clear, independent focus on doing what is
right for all of our stakeholders.
See page 56 Section 172 (1) statement.
Dividend
In light of the recommended cash offer
for the Group announced on 19 May
2022, the Board is not recommending
a final dividend. The total dividend for
the year therefore consists of the interim
dividend of 6.8p per share declared in
November 2021.
Conclusion
HomeServe is a very high-quality
business with a clear strategy and strong
management team, which has been
led entrepreneurially by its founder,
Richard Harpin, for almost 30 years. The
offer from Brookfield recognises the
quality of our business, our people and
our future growth potential, and allows
shareholders to realise their investment
at an attractive valuation. The Board is
unanimous in its support of the acquisition
recommendation.
Tommy Breen
Chairman
24 May 2022
Recommended cash offer
for HomeServe
On 19 May 2022, it was announced
that the boards of Hestia Bidco Limited
(“Bidco”), an indirect subsidiary of
Brookfield Infrastructure Funds, and
HomeServe have reached agreement
on a recommended cash offer made by
Bidco to acquire the entire issued share
capital of HomeServe. Under the terms of
the acquisition, HomeServe shareholders
will be entitled to receive 1,200 pence
for each HomeServe share, valuing
HomeServe at £4.1bn on a fully diluted
basis. This represents a premium of 71%
to the undisturbed closing price on 23
March 2022.
The HomeServe Board is unanimously
recommending the acquisition and
believes that it gives shareholders the
opportunity to realise their investment for
cash at a fair and reasonable value. The
Board believes that Brookfield would be
a good owner for HomeServe. Brookfield
is a long-term investor with a strong
track record of accelerating companies’
growth through sector expertise and
access to capital. Brookfield owns high
quality businesses in utility and residential
sectors, and can bring operational
expertise and new relationships
across HomeServe’s three businesses.
Brookfield’s experience in the energy
transition space will support HomeServe’s
ambitions in this area.
The acquisition is currently expected to
complete during the fourth quarter of
2022 via a court-sanctioned scheme
of arrangement, subject to HomeServe
shareholder approval and various
regulatory clearances. Irrevocable
undertakings to vote in favour of the
scheme of arrangement have been
obtained from c.12.77% of HomeServe’s
shareholders, principally members of
HomeServe’s Board.
Strategic report
Strategic report
HomeServe plc Annual Report & Accounts 2022
6
Chief Executive’s review
Richard Harpin
HomeServe had another successful year,
financially and strategically. In line with our
expectations, we delivered an acceleration
in our financial performance, with our key
profit measure, adjusted profit before tax
up 15% at £220.3m. Statutory profit before
tax rose by 271% to £175.1m, driven by
the absence of any exceptional charges,
as seen in the prior year, as well as good
underlying growth. Our growth was well
balanced between organic revenue growth
and a successful acquisition strategy,
particularly in HVAC buy and build and with
the acquisition of CET to create a market-
leading Claims Assistance business in the
UK. Organic revenue rose by 7.0% (FY21:
1.6%) and we spent a total of £146m on
M&A, of which £112m was in respect of
FY22 acquisitions. ROIC for the year was
15% (FY21: 14%). We made good progress
on all three of our strategic priorities: to
continue to drive growth in North America;
to broaden and transform our UK business;
and in Home Experts, to perfect a market
leading platform to match consumers with
high quality trades.
People first
Having the right people in the right roles is
fundamental to the success of any business.
This year, we achieved a smooth transition
to our new Chairman, Tommy Breen, and
with the arrival of Ross Clemmow in the
new role of CEO, EMEA, all three of our
business divisions are directly represented
at Board level. This gives us a good balance
between operational insight and Group-
level strategic direction. Throughout our
business, teams continue to perform with
the courage, persistence and integrity
service to our customers. We know
from experience that our Membership
customers worry about the cost of an
unexpected repair to their home, and are
reluctant to lose the protection we provide
them when the cost of living is rising.
North American Membership
& HVAC – strong financial
performance and continued
growth potential
North American Membership & HVAC
delivered a strong financial performance,
with adjusted operating profit up 15%
to $159.1m (FY21: $137.9m). Business
development and networking activities
regained momentum and delivered
access to an additional net 7m new
households (FY21: 2m). We now have
access to 73m households (FY21: 66m),
almost 50% of the total. The market
remains under-penetrated and the
pipeline for new partner signings remains
very encouraging. Marketing launches
with new partners were delayed in H2
due to Covid-19 related staff shortages
in their call centres, which temporarily
limited customer growth from these new
relationships. The key driver of revenue
and profit growth in the period was
strong growth in policies (up 6% to 8.7m),
as existing customers upgraded their
coverage in response to successful cross-
sell marketing and continued high levels of
customer service.
HomeServe’s HVAC buy and build strategy
is most advanced in North America,
with a portfolio of 19 locally branded
companies acquired over the last four
we expect of our people, and we are
delighted to report that employee
engagement remained above its pre
Covid-19 level, at 75% (FY21: 78%).
Business model resilience
Over the course of the year, our people
have continued to manage and adapt as
the status of Covid-19 transitioned from
pandemic to endemic. Hybrid working has
become the norm for office-based roles
across our business, and this universal
trend has driven a shift in customer
behaviour. As we spend more time in
our homes, our customers are using
and valuing our repair and maintenance
products even more which means that
in our Membership businesses, claims
frequencies have increased and policy
retention has risen to 84%. In Home
Experts, consumer demand for home
repairs and improvements remains high.
The April 2022 Checkatrade Home
Improvement Price Index shows a 23.3%
increase in searches for tradespeople in
the period January to March 2022, with
early signs of a shift of emphasis from
changes such as kitchen and bathroom
replacements to projects focused on
alternative energy sources and cost
savings (insulation, for example).
The effects of economic headwinds
such as inflation, labour shortages and
supply chain disruption have so far proved
manageable, demonstrating the resilience
of our business model. We are managing
to balance cost inflation with price rises
and in our Membership businesses, the
strength of our repair networks means
that we can continue to deliver excellent
“We made good progress
on all three of our strategic
priorities: to continue to drive
growth in North America; to
broaden and transform our
UK business; and in Home
Experts, to perfect a market
leading platform to match
consumers with high quality
trades. I am delighted to
report that we made good
progress on all three.”
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
7
years. In the period, HVAC installation
revenue saw good organic growth of 19%,
which, together with the five acquisitions
completed in the period, drove growth
of 60% to $121.6m (FY21: $76.0m). HVAC
as a whole (installations and servicing)
contributed $17.8m (FY21: $9.8m) in
adjusted operating profit for the year, and
is a fundamentally important component
of our major initiatives to drive future
growth in North America.
We have a key role to play in helping
homeowners participate in the green
homes revolution, and in helping our utility
partners achieve their decarbonisation
and energy conservation ambitions.
After a successful trial with a large utility
in New York State, HVAC as a Service
(HaaS) is now launched, and provides
homeowners with worry-free upgrades
to new, more efficient heating and air
conditioning equipment, together with an
annual tune-up and breakdown cover, for
a fixed monthly payment. HomeServe’s
installation and maintenance proposition
for domestic electric vehicle charging is
now available to 9m households, and is
opening doors to new utility relationships.
Furthermore, there is excellent growth in
HomeServe’s water loss cover product,
up 27% to 0.8m customers (FY21: 0.6m),
offered on bill via municipal water
utilities to insure their customers against
unexpectedly high costs from domestic
water leakage. We have marketing rights
to cross sell our Membership products to
over 30% of these customers, and
see significant potential to build this
new channel.
Continued strong performance across
Membership & HVAC, early success with
innovative new products and excellent
management, mean that North America
is ahead of its original plan to achieve its
Milestone 2 target of $230m of adjusted
operating profit, and will continue to grow
strongly beyond this point.
EMEA Membership & HVAC
HomeServe’s strategy in EMEA
Membership & HVAC is to grow broad-
based businesses covering Membership,
HVAC and Claims Assistance in the UK,
France and Spain, and to expand into
adjacent territories. We are also building
a new business in Japan in a joint venture
with Mitsubishi Corporation, and have
recently established a new presence
in Germany.
In the UK, there was good early progress
on the business’s transformation plan.
Adjusted operating profit ended the year at
£72.9m (FY21: £72.5m); customer numbers
were in line with our expectations at
1.5m (FY21: 1.6m); and policy retention
was up for the first time in seven years
to 79% (FY21: 78%) thanks to continued
strong customer service. There was good
progress on strengthening and deepening
our partnerships with water utilities;
HVAC business acquisitions are bringing
HomeServe’s successful buy and build
strategy into the UK; and CET, acquired in
October 2021 to give HomeServe a strong
position in the UK Claims Assistance
market, delivered a good in-year
contribution to adjusted operating profit.
We continue to see the energy sector as a
good source of medium-term growth, but
our energy partners are currently focused
on conserving existing customer business
in the face of market turmoil and severe
price pressure, with little opportunity to
market additional services. Nevertheless,
our relationships with E.On and Shell
Energy remain strong and the number of
households they serve has grown from
5.7m in May 2021 to 6.2m in March 2022,
so we are well placed to scale up these
relationships when market conditions
stabilise. Following last year’s decision
to de-commission eServe, all customers
have now been successfully migrated
back to Ensura, simplifying the operation
of the business.
In our French business, we continue
to make good progress, with adjusted
operating profit up 8% to €43.0m (FY21:
€39.8m). Gross new Membership
customer additions were at record levels,
growing by 12% in the period, thanks to
strong partnerships with water utilities and
innovative digital relationships with home
moving aggregators and price comparison
websites. Our French HVAC businesses
are leading the way in the promotion of
low carbon forms of heating and cooling,
which accounted for 60% of installations in
the period. We made progress in Belgium,
servicing our first Membership customers
through our partnership with Eneco and
adding an HVAC business.
In our Spanish business, adjusted
operating profit growth of 24% to €24.6m
(FY21: €19.8m) was driven by good
progress in Claims Assistance in Spain
and Portugal, and in HVAC, where our
Iberian businesses have a strong policy
component and therefore attractive
recurring revenue characteristics. The
team’s deep expertise in Claims Assistance
has helped develop a new proposition
– the service customer model – which
enables large utilities to purchase an à la
carte set of services from HomeServe (for
example marketing, campaign execution,
network management), while retaining
ownership of the end customer. The first
partnerships for this model have been
formed in Spain and Portugal, and there is
a strong pipeline of opportunities for FY23.
Strategic report
HomeServe plc Annual Report & Accounts 2022
8
Conclusion
HomeServe has emerged from the
Covid-19 pandemic with all three of our
business divisions performing strongly.
Our Membership-based business model
continues to be resilient, predictable
and highly cash generative, and we are
well positioned for continued growth.
The strong growth we are seeing in
North American Membership & HVAC
is sustainable, thanks to disciplined
management and innovation focused
on the green homes revolution. In EMEA
Membership & HVAC, we are building
multiple new opportunities and managing
a productive transformation of our UK
business. In Home Experts, we have
built a market-leading platform to match
homeowners with quality trades, which
works better than word of mouth.
Brookfield has made an offer for
HomeServe which recognises the high
quality of our businesses and our people
as well as our future growth potential,
and allows shareholders to realise their
investment at an attractive valuation.
Brookfield is committed to providing long-
term capital and global expertise, which
I am confident will accelerate progress
towards our vision to be the world’s
largest, most trusted provider of home
repairs and improvements, delivering for
customers and tradespeople.
Richard Harpin
Founder and Chief Executive
24 May 2022
with consumers and trades alike. I am
delighted with the way that Checkatrade
is building its position as a recognised,
differentiated market leader, helped by
the next instalment of our proven Julius
Caesar TV advertising campaign, which
promotes the Checkatrade Guarantee.
The business remains on track to be
profitable in FY23, and continues to make
progress towards its Milestone 1 operating
profit target of £45-90m.
Elsewhere in Home Experts, in North
America eLocal’s adjusted operating
profit declined by 15% to $14.5m (FY21:
$17.1m) as consumer demand fell from
last year’s Covid-19 driven peak levels.
Nevertheless, eLocal’s sophisticated pay-
for-performance model delivered good
momentum in monetisation, with revenue
per monetised call growing by 5%, and the
signing of a new strategic agreement with
a key affiliate reinforced eLocal’s strong
position in search engine management
for lead generation. In Iberia and Italy,
Habitissimo continues to improve its
operating model and halved its
operating losses.
Our Japanese joint venture completed its
third full financial year. It continues to sign
new partnerships, and now has access
to 25% of Japanese households through
four electric utility relationships. Customer
numbers are building steadily, and policy
retention is very high at 91%. We signed
our first municipal water partner in the
second half of the year, giving confidence
that our proposition will work for the
municipalities who dominate domestic
water supply.
Home Experts – significant
progress at Checkatrade
As expected, Home Experts achieved
the key milestone of overall profitability
this financial year, generating £4.3m
of adjusted operating profit (FY21: loss
of £10.2m). The principal driver of this
improvement was a much lower adjusted
operating loss at Checkatrade.
Checkatrade continued to strengthen
its position as the UK’s leading online
platform for matching homeowners
with quality trades, with nearly a
fifth of consumers who used a trade
(tradesperson) in the 12 months to
February 2022 having done so via
Checkatrade. The number of paying
trades on the platform grew by 7% to 47k
(FY21: 44k), and average revenue per trade
exceeded our Milestone 1 target at £1,229
(FY21: £939), an increase of 31%. We are
continuing to develop our offer to trades,
to ensure that we deliver value and stay
relevant whether their order books are full
or not, and the introduction of the £1,000
Checkatrade Guarantee resonates well
Chief Executive’s review continued
Reforestation project
HomeServe Spain
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
9
HomeServe.
The Do-It-For-You Experts™
For almost 20 years, we’ve been serving our 4.8 million Membership customers in
the US and Canada with one mission in mind: to be the first place people turn to for
emergency home repairs.
With a home repair plan from HomeServe, you have the peace of mind knowing that
the Do-It-For-You Experts will be there to fix it. We send local, licensed and expert
technicians to fix your repair, helping free you from the worry and inconvenience that
comes with emergency home repairs.
NORTH AMERICAN MEMBERSHIP & HVAC
HomeServe plc Annual Report & Accounts 2022
9
Other information
Strategic report
Governance
Financial statements
Strategic report
Governance
Financial statements
HomeServe plc Annual Report & Accounts 2022
9
Strategic report
HomeServe plc Annual Report & Accounts 2022
10
FY22 update
As the response to Covid-19
transitions from pandemic to
endemic, the secular shifts
that will remain permanent
features for many societies
are becoming clearer. One
that is of significant relevance
for HomeServe is the greater
proportion of time that
many homeowners are now
spending working from
home. This benefits both the
Membership & HVAC divisions
and Home Experts.
In Membership, product usage (as seen in
claims frequencies) has settled at a higher
level than the pre-pandemic baseline,
with more time spent working from home
resulting in higher levels of wear and tear
on key home systems (e.g. toilet flushes).
In Home Experts, more home working is
likely to see homeowners continue to seek
improvements to their homes to make
the home environment flexible, pleasant
and productive. Recent research from
Checkatrade detects a shift in focus from
cosmetic improvements to projects which
deliver environmental or cost of living
benefits, such as insulation.
Market overview
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.
“What we are seeing is
that customers are more
astute about the build
process - specifically where
planning stipulates an older
or heritage property. Here
we are asked to source
sustainable materials and
request fitting, such as heat
pumps and triple glazing.
But outside of this, we are
seeing more customers
wanting to spend their
money on fancy bespoke
kitchens, media walls,
cinema rooms and
lighting too.“
Emma Kemp, Director at I-furb
Bespoke Construction
30% Insurance minded
Overview
• Drawn to the convenience of a trusted
solution for dealing with a problem in
their home
• Like to budget carefully and avoid
unexpected repair bills
• Have historically tended to be an older
demographic often on fixed incomes,
however millennials are now attaining
home ownership at greater scale.
HomeServe offer:
Membership & HVAC
20% DIYers
Overview
• Have the knowledge, skills and
motivation to carry out repair work
themselves
• These homeowners may call on a third
party for jobs requiring specialist skills,
equipment or qualifications
HomeServe offer:
HVAC & Home Experts
50% Home Improvers
Overview
• Find a trade when needed – by word
of mouth, paper directories and
increasingly online
• Finding a high-quality trade, without
hassle, is often just as important as
financial considerations
• Typically appeals to a younger
demographic whose instincts are to
search online
HomeServe offer:
Home Experts
What’s changing?
This segment is evolving, reflecting
wider demographic shifts in home
ownership, notably as millennials
come to the fore. The growth in share
of home ownership by millennials has
also been correlated with a slightly
more affluent, digitally conversant
consumer than seen historically.
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.
What’s changing?
There is a significant opportunity
to accelerate the shift in consumer
demand online in searching for
reputable tradespeople, as has already
been seen for property, cars and travel.
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
11
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 developed to serve the needs of
modern-day homeowners – for example,
professional flat pack furniture assemblers
and home WiFi gurus did not exist fifteen
years ago. We expect it eventually to follow
property, car purchases and travel, all of
which are now over 60% online in terms of
consumer demand.
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. More recently, we have
been 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 penetration
There is a marked difference in penetration between our most mature market, the UK, and our highest growth market in North America.
Our experience shows that with most affinity partners, maximum uptake amongst their customer base is around 30%. This holds across
each of our established territories and therefore drives our view of the addressable market.
UK addressable market
North America addressable market
Total households: 28m
The UK market, where our historical
focus has been on water, is nearing
maturity. The UK is the only market where
HomeServe has a bigger competitor,
but the competitive dynamic is stable.
As conditions stabilise in the retail
energy supply market, HomeServe has
opportunities to win more customers
through this channel. Additionally, the
adjacent segment of Claims Assistance
has been growing in recent years, and
HomeServe has a strong position in this
market through its CET business.
See page 43 Operating review
Total households: 151m
North America remains a significantly
under-penetrated market. The 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,
and a handful of utilities still operating
their own in-house programs.
HomeServe has exciting product
development opportunities through
offerings like HVAC as a Service and water
loss cover (i.e. ServLine).
See page 41 Operating review
HomeServe
45m
Homes
Unserviced
Whole Home
Warranty
Acquirable utility
policy books
American
Water
Home
assistance
market value
£14bn
Market size
Home repairs and
improvements
market value
£450bn
Competitive positioning
In Membership, HomeServe has clear
market leadership in North America,
and is also the largest independent
provider in France and Spain.
HomeServe’s utility-partnership model
remains largely unique across each
of its territories, reflecting the large
barriers to entry for new players to
build relationships with typically risk
averse utilities.
In Home Experts, Checkatrade
and Habitissimo are leaders in their
respective markets, whilst eLocal will
be able to build further scale in the vast
US market.
HomeServe
Unserviced
British Gas
8m
Homes
Other
Strategic report
HomeServe plc Annual Report & Accounts 2022
12
What we do
To insurance-minded homeowners, we provide policies to
cover a range of home emergencies via subscription-based
Membership services. The cost of repairs covered under our
policies is underwritten by third-party insurers, to insulate us
from surges in demand and ensure that we can always put
our customers’ needs first. Our HVAC installation, repairs
and servicing capabilities mean that we can participate in the
domestic green energy revolution by promoting eco-friendly
sources of heat and cooling.
In Membership & HVAC, our established route to market is via
partnerships with utilities and municipalities, 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 peace of mind our
annual cover gives them. Our local networks of employed and
subcontracted trades ensure consistently high service standards
whenever we visit a customer’s home.
For people who prefer to deal with issues as they arise (‘Home
improvers’), and DIYers who need specialist help, we have online,
on-demand Home Experts platforms that match homeowners
with local trades (tradespeople) – Checkatrade in the UK; eLocal
in North America; Habitissimo, principally in Spain, Portugal and
Italy; plus a minority interest in maison.fr in France.
In Home Experts, trades are our customers, and our job is to
match them with consumers who need their services in their
local area. We help them to grow their business by providing
customer contacts and quote requests, and also manage their
reputation with trustworthy online reviews.
We run our business in three largely autonomous divisions,
which all benefit from our five key sources of value, these evolve
as our business grows. Capital allocation decisions are made at
Group level, for the benefit of the business as a whole.
Our Responsible business framework spans our three divisions
and defines the way we work. We share expertise in managing
environmental, social and governance risks. We are passionate
about contributing to positive change in our industry – for
example by promoting environmentally friendly energy sources
and creating trades apprenticeships.
By giving our businesses autonomy, and collaborating to share
expertise and experience, we aim to deliver strong, consistent
earnings growth and move towards our vision of being the
world’s largest and most trusted provider of home repairs
and improvements. We aspire to be able to do every job,
in every home.
See page 10 for Market overview.
See page 20 for our Responsible business.
See page 32 for Principal risks and uncertainties.
Business model and strategy
Partnerships: we create connections which
generate value for all parties. In Membership &
HVAC, we connect utilities and municipalities,
homeowners and trades, in a network of
relationships which is unique to us. In Home
Experts, we connect consumers and trades and
provide unique value add, such as the Checkatrade
Guarantee. Our expertise at forming strong
partnerships has taken years to build and is a
competitive differentiator.
Capacity for innovation: in Membership & HVAC,
we are constantly refreshing our customer and
partner propositions to optimise customer growth
and develop our affinity partnerships. Green energy
is a key current focus, where we are promoting
solutions to challenging aspects of the green
homes revolution such as the cost of moving to an
alternative heating and cooling source. In Home
Experts, we are developing a unique business
model to match consumers with quality trades to
get jobs done well.
Customer obsession: we cherish our reputation for
strong customer service by putting our customers
at the heart of everything we do. In Membership
& HVAC, our customers are homeowners and in
Home Experts, our trades are our customers.
Trades network management: in both Membership
and Home Experts, we create and manage
networks of trades to deliver great service to
consumers. These networks have taken years to
optimise and perfect.
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.
Our key sources of value
David Bower, Chief Financial Officer, HomeServe plc
“HomeServe is built on five key
sources of value, the combination
of which is unique to us.“
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
13
Strategic report
N
OR
TH
A
ME
RI
CA
N
M
EM
BE
RS
HI
P
&
HV
A
C
HO
ME
E
XP
ER
TS
Other information
Governance
Financial statements
E
n
v
ir
o
n
m
e
n
t
P
e
o
p
l
e
EM
EA
M
EM
BE
RS
HI
P
&
H
VA
C
C
o
m
m
u
n
it
i
e
s
C
u
s
t
o
m
e
r
s
R
e
s
p
o
n
s
i
b
l
e
b
u
si
n
e
s
s
Sources
of value
Strategic report
HomeServe plc Annual Report & Accounts 2022
14
Business model and strategy continued
TARGETS
North American Membership & HVAC
is our biggest short to medium-term
growth opportunity.
Tom Rusin, CEO, North American Membership & HVAC
North American Membership & HVAC is focussed on providing exceptional customer
service; on continuing to sign new affinity partnerships to give us access to more
households; on developing the best products and services to match the needs of our
customers and our utility partners; and on marketing effectively and engagingly through
affinity partner and local HVAC brands. We operate a high-quality network of vetted
tradespeople through a combination of directly employed and network contractors.
We use M&A to acquire existing policy books as well as high quality, profitable HVAC
businesses. By doing all of this, we generate repeat and recurring income and a strong
return on invested capital (ROIC).
Our priorities include continuing to develop our relationships with our affinity partners.
We built our business using direct mail to reach customers, and are now making our
business more digital across the board. We are broadening our product range to appeal
to millennials as well as older demographics. We are constantly building and refreshing
our team of outstanding leaders, who have proven ability to lead with courage,
persistence and integrity. We are committed to doing business responsibly, and to
building a diverse workforce right across our organization with the skills and capabilities
we need to continue to grow.
See page 41 for North America Membership & HVAC Operating review.
Key performance indicators
1. New Membership customer additions (m)
2. Net income per Membership customer ($)
3. Retention rate (%)
4. HVAC adjusted operating profit ($m)
See page 32 for Principal risks and
uncertainties.
NORTH AMERICAN MEMBERSHIP &
HVAC STRATEGY
Membership customers
4.8m +3%
Medium-term target 6-7m
4.8m
4.7m
FY22
FY21
Margin (policies)
25% –
Medium-term target 24-26%
25%
25%
FY22
FY21
HVAC adjusted operating
profit
$17.8m +79%
Medium-term target $30-45m
$17.8m
$9.8m
FY22
FY21
Adjusted operating profit
$159.1m +15%
Medium-term target $230m
$159.1m
$137.9m
FY22
FY21
Income per Membership
customer
$113 +5%
Medium-term target $120-125
$113
$108
FY22
FY21
Flywheel
Develop the best
products & services to
match customer needs
Invest in
more marketing
Invest in a high
quality repair &
installation network
Provide an
exceptional customer
experience
Invest in partnerships,
technology &
innovation
Accelerate customer
growth & profit per
customer
The most
trusted provider
of home repairs,
installations and
services
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
15
Strategic report
EMEA MEMBERSHIP & HVAC STRATEGY
Ross Clemmow, CEO, EMEA Membership & HVAC
In EMEA Membership & HVAC, we are passionate about solving everyday home
emergencies and improving sustainability in the home. We aspire to being best in the
world at connecting trades with customers to get home repairs done easily. We drive
profitable, recurring revenue through Membership and repeat jobs, and are building
three key capabilities – Membership, HVAC and Claims Assistance.
Our dedicated and experienced local management teams are developing highly
efficient, multi-skilled networks of marketers, customer service experts and technicians
capable of creating and supporting market leading products and services, including
electric vehicle charging and green heating solutions. Across EMEA, we are driving to
make our businesses more digital.
UK Membership is our most established business. While the competitive landscape is
stable, it is the only one to operate with a larger competitor. Customer numbers for
our traditional plumbing and drainage products are past their peak, so we are looking
to expand our product line and partnerships to stabilise our customer book at around
1.5m customers. We have established a 2-3 year transformation plan to stabilise our
UK business and return it to profitable growth, which will build a more efficient, multi-
channel, multi-product business. We are rolling out our successful HVAC buy and build
strategy, increasing our presence in the energy markets and expanding into Claims
Assistance with the acquisition of CET in October 2021.
In France and Spain, we have already diversified into multi-product, multi-channel
businesses to support stable, profitable growth. In Spain, we have developed a new
model (“service customer”) to return our Membership business to growth following the
end of our partnership with Endesa. Our near neighbour geographic expansion strategy
leverages our know-how in existing markets to develop new opportunities in Belgium,
Portugal and Germany.
We have a promising joint venture in Japan with Mitsubishi Corporation.
See page 43 for EMEA Membership & HVAC Operating review.
See page 32 for Principal risks and uncertainties.
Key performance indicators
1. New customer additions (m)
2. Retention rate (%)
3. Proportion of revenue from non-
Membership businesses (%)
EMEA MEMBERSHIP & HVAC STRATEGY
IN A NUTSHELL
We are growing broad-based
businesses in the UK, France, Spain,
Belgium, Portugal, Germany and Japan
based on three key capabilities:
Flywheel
Best products that solve
everyday problems and
save water & energy in
the home
Flexible,
value-added diverse
partnerships
Drive profitable jobs
in high volumes to
our broad network
of trades
Access to more
households with multi-
product relationships &
recurring revenues
Service excellence
& efficiency through
people, scale &
technology
Membership
Home emergency
policies covering
plumbing, heating and
electricals.
HVAC
Installation, maintenance
and repair of heating,
ventilation and air
conditioning systems.
Claims Assistance
Home emergency
assistance for home
insurance policy holders.
Other information
Governance
Financial statements
First choice
for Home
Assistance &
Repairs
Strategic report
HomeServe plc Annual Report & Accounts 2022
16
Business model and strategy continued
TARGETS
For Checkatrade only.
HOME EXPERTS
Richard Harpin, Founder and Chief Executive
Our Membership & HVAC businesses are built on a single business model, which we
have adapted and scaled to serve different geographies. My ambition is to build an
equally successful business model for the significantly bigger £450bn home repairs and
improvements market.
In Home Experts, we match homeowners with quality trades, on demand and online,
to get jobs done well. By doing this successfully, consumers will come back again and
again, and we’ll deliver more high quality leads to our tradespeople.
the UK’s leading online directory of checked and vetted trades
the market leader in Spain
in the US, where we took our stake to 90% in September 2021
To make our platforms a success, we are building products and services that inspire
loyalty from trades and consumers alike. For consumers, we help them check a trade’s
reputation as well as book a job. We make it easy for them to find the trade they
need and see relevant content to help with their search. We are even introducing free
guarantees. For trades, we let them control how much work they get, and how much
they pay. We are underpinning our platforms with intelligent, scalable, tech-enabled
solutions and data management.
There are many challenges associated with building a successful platform business,
such as balancing supply and demand and attracting and retaining trades through feast
and famine. Our teams at Checkatrade, Habitissimo and eLocal are learning from each
other and making great progress.
Our model is most advanced at Checkatrade in the UK.
See page 48 for Home Experts Operating review.
See page 32 for Principal risks and uncertainties.
Key performance indicators
1. Paying trades (k)
2. Average revenue per member (£)
3. Contacts (m)
HOME EXPERTS STRATEGY
Trades
47k +7%
Medium to long-term target
150,000-200,000k
47k
44k
FY22
FY21
Average revenue per trade
£1,229 +31%
Medium to long-term target
£1,200-1,300
£1,229
£939
FY22
FY21
Adjusted operating loss
(£2.8m) -83%
Medium to long-term target £45-90m
(£2.8m)
(16.0m)
FY22
FY21
Flywheel
Offer a marketplace for
getting household
jobs done that beats
word of mouth
Generate more jobs
from consumers
& repeat consumer
usage
Invest more in
product development,
marketing,
technology & data
Attract more high quality
available trades
Profitably monetise
jobs & services for
trades & consumers
Getting every
household job
done easily
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
17
HomeServe plc Annual Report & Accounts 2022
17
HomeServe was founded in the UK in 1993, expanded
into France in 2001, Spain in 2007 and Japan in 2019.
In the last year, we have started to build our footprint in
Belgium, Portugal and Germany. One of the strengths
of our Membership & HVAC business model is its
international appeal.
EMEA MEMBERSHIP & HVAC
Strategic report
Other information
Governance
Financial statements
HomeServe plc Annual Report & Accounts 2022
18
Strategic report
At HomeServe we measure progress against the key strategic
initiatives of our three divisions by tracking relevant key
performance indicators (KPIs). Additionally, KPIs are also tracked
at the Group level. We now run our business in three largely
autonomous divisions, each of which are at different stages of
development and have different growth drivers. As such, the KPIs
presented here are refreshed from prior years to more accurately
capture the specific growth drivers of each division.
Directors’ remuneration is structured to support the achievement of the Group’s
objectives, and to drive its financial and operational performance. As such, each of the
Group KPIs shown below forms a part of the package of performance measures to which
executive directors’ remuneration is linked. See page 97 Directors’ remuneration policy.
Definitions for each KPI are given below, in addition to the division to which they
correspond and factors driving movements on the prior year. Further detailed
commentary at the business unit level is available in the Operating review.
Please see the Glossary for a reconciliation of adjusted profitability measures to the
equivalent statutory metric.
Key performance
indicators
1. Adjusted profit before tax
The Group’s key profit measure by which we
monitor business growth.
A return to strong profit growth driven by
North America and Home Experts.
Group
NORTH AMERICAN
MEMBERSHIP & HVAC
15%
14%
14%
15%
16%
FY22
FY21
FY20
FY19
FY18
2. ROIC
Tracks the return on invested capital (ROIC),
being the Group’s ability to generate returns
from each unit of capital (both debt and
equity) being utilised in the business. The
Group calculates ROIC by expressing net
operating profit after tax as a percentage
of invested capital (being the average value
through the year of total assets net of current
payables, cash and cash equivalents).
Modest improvement in ROIC year on year
driven by a first full year operating profit in
Home Experts.
£220.3m
£191.3m
£181.0m
£161.7m
£141.7m
FY22
FY21
FY20
FY19
FY18
4. HVAC adjusted operating profit
Tracks our ability to drive organic growth
from the existing HVAC portfolio and
continue to source and acquire high
quality targets.
Good growth in profit contribution from
HVAC, reflecting annualisation of prior
year acquisitions and organic growth
from existing businesses.
$17.8m
$9.8m
$5.0m
FY22
FY21
FY20
2. Net income per Membership customer
Tracks our ability to deliver value added
products and services to existing
customers, which in turn leads to growth
in their number of policy holdings
and income per customer derived by
HomeServe.
Good growth in the year as existing
customers continue to increase their
policies held as they upgrade through
the suite of products.
3. Retention rate
Tracks our ability to continually design
products that are valued by customers,
and deliver great service when customers
come to use the products, such that they
want to renew their membership
Remains extremely strong at 85%, with
core value proposition continuing to
resonate well with homeowners.
3. Growth in adjusted earnings per share - EPS
(3-year CAGR ending 31 March)
Tracks our ability to grow the Group’s
earnings for shareholders, offering indicative
potential for shareholder returns through
both distributions (dividends) and capital
appreciation.
Return to strong EPS growth following a
pandemic-impacted FY21.
4. Relative total shareholder returns
(3 years ending 31 March)
Tracks the return to shareholders from
dividends and share price gains, relative to
the FTSE constituents from 31 - 200.
HomeServe shares impacted by de-rating
during second half of calendar 2021.
9.5%
8.3%
15.3%
19.8%
21.1%
FY22
FY21
FY20
FY19
FY18
FY22
FY21
FY20
FY19
FY18
HomeServe FTSE 250
29.6%
24.7%
139.8%
151.8%
118.3%
52.6%
-16.1%
14.7%
13.4%
22.6%
1. New Membership customer additions
Tracks our success in organically
converting our addressable market into
revenue-generating customers.
Return to growth in organic customer
additions following Covid-19 impacted
FY21.
FY22
FY21
FY20
FY19
FY18
85%
85%
83%
83%
83%
$113
$108
$102
$96
$91
FY22
FY21
FY20
FY19
FY18
FY22
FY21
FY20
FY19
FY18
1.0m
1.2m
1.2m
1.0m
1.2m
NORTH AMERICAN
MEMBERSHIP & HVAC
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
19
*Unless otherwise stated, Home Experts metrics are for Checkatrade only.
EMEA MEMBERSHIP & HVAC
HOME EXPERTS*
2. Average revenue per member
Data shown for Checkatrade only. Tracks
our ability to design, deliver and monetise
value-added services to our online
community of tradespeople.
Strong growth driven by monetisation
initiatives and non-repeat of discounts
given to trades at the onset of the
pandemic.
£1,229
£939
£1,023
FY22
FY21
FY20
3. Contacts (m)
Tracks our ability to continually deliver
value to our tradespeople, whether on a
subscription or paying for performance, in
the form of access to consumers’ home
improvement job requirements.
Contrasting performance at Checkatrade
and eLocal reflects different pace at
which pandemic effect seen. Reduction at
Habitissimo reflects transition to Directory
Extra and focus on Continental European
markets.
FY22
FY21
FY20
FY19
3. Proportion of revenue from non-Membership businesses
Tracks the diversification of the EMEA businesses into the complementary product
offerings of HVAC and Claims Assistance.
Continued growth in claims handling in Spain and traction with HVAC buy-and-build in
France. CET contribution and HVAC growth drives UK increase.
Checkatrade Habitissimo
1. Paying trades
The number of paying customers in our
Home Experts business, being tradespeople.
Tracks our progress in building an engaged
and high quality online community of
trades.
Trades growth of 7% at Checkatrade;
implementation of Directory Extra model
at Habitissimo sees paying
trades fall.
1. New customer additions (m)
Tracks our success in organically converting our addressable market into revenue-generating
customers.
Continued good growth in France reflecting strong traction with non-utility partners in
particular; UK customer additions impacted by retail energy supply market.
2. Retention rate
Tracks our ability to continually design products that are valued by customers, and deliver
great service when customers come to use the products, such that they want to renew their
membership.
Greater product usage and increased value perception drive increase in UK; higher
proportion of first year policies drives slight reduction in France; reduction in Spain
reflects continued run-off of Endesa policy book
88%
89%
89%
88%
87%
79%
80%
83%
83%
80%
78%
79%
78%
78%
79%
FY18
FY19
FY20
FY21
FY22
UK France Spain
2
1
1
2
3
3
HomeServe plc Annual Report & Accounts 2022
19
Strategic report
Governance
Financial statements
Other information
UK
FY18
6%
FY19
7%
FY20
6%
FY21
4%
FY22
10%
0.1
0.1
0.1
0.2
0.2
0.3
0.4
0.2
0.1
0.2
0.0
0.2
0.1
0.2
0.1
UK
France
Spain
FY18
FY18
FY18
FY19
FY19
FY19
FY20
FY20
FY20
FY21
FY21
FY21
FY22
FY22
FY22
20%
1%
France
1%
6%
12%
FY18
FY19
FY20
FY21
FY22
61%
61%
68%
71%
74%
Spain
FY18
FY19
FY20
FY21
FY22
36k
39k
44k
47k
38k
24k
20k
FY21
FY22
Checkatrade
8.1
10.3
FY21
FY22
eLocal
3.6
3.4
FY21
FY22
Habitissimo
2.0
1.1
11k
EMEA MEMBERSHIP & HVAC
HOME EXPERTS
HomeServe plc Annual Report & Accounts 2022
20
HomeServe plc Annual Report & Accounts 2022
20
Strategic report
Responsible business
Our relationships with our key
stakeholders are critical to the
success of our business.
Homeowners
Homeowners are the key consumers of
our services, and making home repairs
and improvements easy for them is at
the heart 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.
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.
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.
FY22 update
We are working across our business
to make it easier for homeowners
to interact with us. This year our
French business introduced new
AI call handling software called
Atlantis. Atlantis is designed to make
the customer experience smoother
for homeowners and has been well
received so far.
FY22 update
In North America in particular,
our utility partners are under
pressure from their regulators to
make a positive contribution to the
decarbonisation agenda. We are
working with them to develop new
products, to accelerate the adoption
of alternative energy sources, and to
promote domestic electric vehicle
charging.
FY22 update
Beyond our regular programme
of shareholder engagement,
we introduced our Chairman
to shareholders this year with a
productive set of meetings.
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
21
HomeServe plc Annual Report & Accounts 2022
21
Strategic report
Governance
Financial statements
Other information
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.
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.
Underwriters and other key
suppliers
We work with large reputable suppliers,
who have established and responsible
business practices. Three of our largest plc
procured suppliers are Salesforce, CISCO
and Oracle, all of whom have their own
responsible business standards. In our plc
procurement process we complete an
appropriate level of due diligence, which
reviews the potential supplier’s approach
to sustainable and ethical procurement,
and ensures business between the two
parties will be conducted responsibly.
One of our key supplier groups is made
up of the firms who underwrite the
short-term cost of our Membership repair
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.
FY22 update
We introduced flexible memberships
at Checkatrade, so that trades
can flex their membership to suit
their changing needs. Through
the HomeServe Foundation, we
continued our campaign to promote
trades apprenticeships.
FY22 update
Our focus this year was on diversity
and inclusion. We make every effort
to ensure people feel welcome
and are treated fairly, regardless of
their race, gender, gender identity,
age, sexual orientation, religion, or
experience.
network, protecting our business
from short-term claims volatility and
enabling us to always do the right
thing for our customers. We continue
to manage these and our other key
supplier relationships carefully and
review them regularly.
FY22 update
We have built strong and stable
relationships with our suppliers
over the years and continue to be a
responsible part of our supply chains,
for example, by paying to terms.
FY22 update
The HomeServe Foundation hosted
a parliamentary roundtable this year
with ministerial departments, key
decision makers and influencers
to discuss the findings of the UK
Domestic Trades Skills Index, and
to produce recommendations to
increase the number of apprentices
by providing more support to small or
medium sized businesses.
HomeServe plc Annual Report & Accounts 2022
22
HomeServe plc Annual Report & Accounts 2022
22
Strategic report
At HomeServe, the
customer is at the heart of
everything we do. We care
about offering the best
products and ensuring the
best possible customer
experience throughout the
customer journey.
Our purpose is to make home repairs
and improvements easy and a key area
of focus for us currently is how to make
greener choices easier for customers.
We look forward to delivering our
solutions for this in the near future.
The UK business won ‘Best Vulnerable
Customer Initiative’ at the Modern
Insurance Magazine, Customer Service
Excellence Awards 2022 for their
Customer First initiative. They reached
70,000 reviews on Trustpilot and are
rated excellent.
HomeServe France won three customer
service awards this year, including: ‘100%
Customer Service Made in France’,
‘Elected Customer Service of the Year’
from ESCDA for the sixth year in a row,
and for the second year in a row the
‘Wow Effect’ category in the CX awards.
Home Experts
Our Home Experts businesses have
different customer and legal frameworks,
recognising the different regulatory
environments in which they operate.
However, these frameworks 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.
Governance
Each of our Membership businesses 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, laws and regulations.
Each committee has developed a KPI
dashboard to assess the quality of
customer service. The metrics vary
depending on what is most relevant
for each business but typically cover
customer satisfaction, quality of service,
product values, cancellation rates, claims
repudiation rates and complaints.
Call recording and screening
Wherever possible, sales, claims and
complaints calls are recorded and subject
to formal call screening processes.If 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.
Measurement
Customer surveys are used at a minimum
of three touch points throughout the
customer journey: sales, claims handling,
and engineer/ contractor work at
customers’ homes. Each business has
developed their own KPI based on what
is most appropriate for the business. It
is either a percentage of dissatisfaction
or a 5-star satisfaction rating, and some
of our businesses track both. The KPI
is incorporated in senior executive and
management bonus schemes.
Incentive schemes for front line staff
Incentive schemes for front line staff have
been carefully chosen to elicit the right
behaviours from our agents, particularly
in regard to great customer service. Whilst
such schemes do include commercial
targets, the primary driver is quality of
service, and agents only receive payment
if the quality threshold is exceeded.
FY22 customer service wins
For the third year in a row HomeServe
Spain won the ‘Best Customer Service”
award from Mystery Shopper.
Responsible business continued
Membership and HVAC
businesses
The Group has adopted a customer
governance framework with which each
of the Membership businesses must
comply. On an annual basis the businesses
are required to complete a detailed
questionnaire on compliance with the
framework. This questionnaire is signed
off by the business unit’s CEO, with whom
ultimate responsibility for customers rests.
The results are reported to the Audit & Risk
Committee.
Each of the Membership businesses has
incorporated the legal and compliance
functions of the HVAC businesses in their
territory. They are now working with
the local HVAC businesses to develop
appropriate KPIs and to provide them
with an appropriate level of support and
oversight on customer service matters.
Customers
Customer dissatisfaction 2
Customer satisfaction 1
4.46%
4.74/5 star rating
1 Used by our North American, French and Spanish businesses. 2 Used by our UK and Spanish businesses.
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
23
HomeServe plc Annual Report & Accounts 2022
23
Strategic report
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.
Following the Covid-19 pandemic,
we learnt that our people value hybrid
working practices which offer them
the flexibility to excel in both their
work and personal lives. Therefore, we
aim to evolve our working practices
across all our businesses to facilitate
hybrid working.
HomeServe employed an average of
c. 8,600 people globally through FY22,
with about 37% of these being based
in the UK, 30% in the US and 33% in
Continental Europe. Over 7,700 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. 1,300 engineers.
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.
Our businesses operate on strong
foundations, championing human
rights, equal opportunities, diversity,
and inclusion, fair pay, and a strong
Health & Safety culture.
We take great pride and care in delivering
for our customers and we focus on
working with third parties and partners
who share our passion for the customer.
We monitor their performance to ensure
they deliver to the same high standards
that we expect of ourselves.
Information and cyber security
Across our businesses we have strong
information and cyber security processes
in place to protect our customers and
our business. Overall responsibility for
the Group’s information and cyber
security strategy sits with the Group
Chief Information Security Officer. He is
supported by our Group cyber security
team, who provide consultancy, direction,
and oversight on our policies, frameworks,
and strategy.
We maintain a Group Cyber Security
Policy, aligned with and based on the
internationally recognised ISO 27001
standard, and a Group information
and cyber security strategy. These are
approved by a Board Director and our
information security management
framework ensures we provide updates
to the Board’s Audit & Risk Committee.
Managing cyber security from a
centralised function achieves efficiencies
through economies of scale and enables
our cyber security maturity to be
developed consistently across the Group.
Each of our businesses directly manage
their own information and cyber security
risk to ensure focus and accountability is
maintained at an operational level. Both
local and Group oversight procedures are
carried out, including regular reporting
and reviews. An ongoing security
improvement plan is maintained for
each business, to ensure delivery of the
strategic roadmap and to allow us to
support business change as well as react
to the ever-evolving threat landscape. Our
co-sourced internal audit partner, PwC,
undertake specific audits in each of our
businesses annually to validate activities
and approaches.
People strategy
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. It has been
agreed that during FY23 we will expand
the remit of the Board’s People Committee
and it will become the ESG & People
Committee thereby improving the Board’s
oversight of ESG matters, which align with
those of the People Committee.
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.
1. 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
equality in our decision making.
2. Continuing to evolve our employee
engagement strategy, so that we can
understand the needs of our people
and make HomeServe an even better
place to work.
3. Further developing our internal
capability so that we can create a rich
talent pipeline that will fuel the future
needs of our growth plans.
4. 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
The HomeServe Way defines how we
operate, built around our core values of
courage, persistence, and integrity. These
values were developed from lessons
learnt over our years of operating, and are
continually communicated and promoted
Group-wide by the Group’s management
team. The HomeServe Way plays a
decisive role in our hiring, promotion,
and recognition activity.
Employee engagement
75% -3ppts
75%
78%
FY22
FY21
People
Governance
Financial statements
Other information
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
24
HomeServe plc Annual Report & Accounts 2022
24
Strategic report
People continued
Survey
Global People
Survey 2018
Global People
Survey 2019
Global People
Survey 2020
Global People
Survey 2021
Global People
Survey 2022
Global
Employee
Engagement
71%
71%
82%
78%
75%
The results of our most recent survey demonstrate positive outcomes from our people
with 76% of our employees saying that taking everything into account this is a great place
to work, 88% of people believe that the Company has taken the right measures to protect
employees’ health during the Covid-19 pandemic, and 89% of people said that when you
join the Company you are made to feel welcome.
2021 was our most successful year to date in receiving recognition for our achievements
in employee engagement; HomeServe Membership Limited, HomeServe Spain,
HomeServe France, Checkatrade and Habitissimo all received places on their country’s
Best Workplace lists. As a result of these achievements the HomeServe Group earned a
place on Europe’s Best Workplaces list and ranked 24th in the Great Place to Work Best
Multination Workplaces category.
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 to our recruitment strategy.
HomeServe remains committed to conducting an annual employee engagement survey
to gather feedback from employees, and to acting on the key areas of focus identified in
each business.
Learning and development
Our employees are supported by their 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 professional
qualifications from various awarding bodies.
Talent management programmes
Despite the impact of the Covid-19 pandemic, we continued to build on and evolve our
suite of talent development programmes. In total, over 60 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 for leadership. Female representation on the last cohort of
our Edge programme was 42%.
Group-wide talent programmes
The HomeServe Way
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.
We are proud of our values-led culture.
It underpins our ability to innovate and
adapt to changing circumstances. We care
about our people, and our people care
about our business, which is reflected in
our employee engagement survey, where
79% stated that they were proud to work at
HomeServe.
Employee engagement
HomeServe has again taken part in an
annual global engagement survey which
received a response rate of 78% from our
people. Each of our markets have worked
hard over the last 12 months to overcome
the challenges of hybrid working and
maintain a sense of belonging to our
culture. The results from our March
2022 survey reinforced the passion and
resilience of our people as we received
an employee engagement score of
75%, which shows consistently high
engagement levels, and our results are
still tracking higher than pre-pandemic
engagement scores.
CEO
forum
Group
Local
Summit
Edge
Local leadership development programmes
Leadership development for our
highest potential leaders - successors
to Group ExCo. 8 per Cohort.
High potential Senior Leaders
preparing for larger roles -
successors to Market/BU ExCo. 16
per Cohort.
Emerging mid-level leaders
preparing for more responsibility
within function - successors to
Senior Leaders. 18 per Cohort.
Leadership development for all
people managers, customised to
current priorities at business level -
pipeline for mid level leaders.
Responsible business continued
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
25
HomeServe plc Annual Report & Accounts 2022
25
Strategic report
Diversity, Equality & Inclusion (DE&I)
We know that 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 operate, and that difference is valued and celebrated.
We make every effort to ensure people feel welcome and are treated fairly, regardless
of their race, gender, gender identity, age, sexual orientation, religion, or experience. We
recognise the importance of self-identification, given the broad circumstances under
which discrimination can happen.
We are committed to addressing under representation across the organisation. Since
the last Hampton Alexander review, we are pleased to have increased the level of female
representation on our Board from 22.2% to 27.3%. However, we recognise that this
improvement was not enough to meet the original Hampton Alexander target of 33%
representation. Further details on the Board’s efforts to increase diversity can be found
on page 80. Female representation on our Executive Committee, and our Executive
Committee and direct reports combined, has declined over the year. To address this,
we intend to introduce internally monitored gender representation targets across the
organisation and particularly at the senior leader level. We believe this will help us with
our progress towards achieving the new targets set out by the FTSE Women Leaders
Review (previously the Hampton Alexander Review).
Our performance in the FTSE Women Leaders Review (published in February 2022) was
as follows:
Benchmark
Board
ExCo
ExCo & Directs
HomeServe 2021
27.3%
16.7%
25.0%
HomeServe 2020
22.2%
28.6%
30.4%
FTSE 250 2021
36.8%
24.4%
30.7%
As at 31 March 2022, the level of female representation amongst our Senior Leaders
was 31%. We recognise this population as being a key pipeline of talent to executive
roles in the future and therefore we remain committed to increasing the level of female
representation in this group.
31 March 2022
31 March 2021
Female
Male
Female
Male
Board
3 (27%)
8 (73%)
3 (25%)
9 (75%)
ExCo
2 (17%)
10 (83%)
3 (23%)
10 (77%)
Senior Leaders 1
59 (31%)
133 (69%)
58 (32%)
122 (68%)
Rest of workforce
4,566 (57%)
3,426 (43%)
3,330 (48%)
3,623 (52%)
Total workforce 2
4,625 (57%)
3,559 (43%)
3,388 (47%)
3,745 (53%)
¹ Includes ExCo. ² Total workforce includes the rest of workforce and Senior Leaders. It does not include the Board.
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. Our
mean Gender Pay Gap for FY22 is as follows (based on April 2021 data).
Mean Pay Gap
Entity
2021
2020
HomeServe Membership
19.0%
20.0%
Checkatrade
32.6%
31.0%
HomeServe UK
21.4%
21.2%
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 technical and engineering
roles, which in the case of the latter, feed into the higher graded managerial roles in field
operations. Despite the volume of males in engineering roles being in line with national
averages, we believe there is a significant opportunity to attract more females into these
roles through targeted recruitment and career development activities.
We have taken steps to accelerate our
overall DE&I efforts, with a Board agreed
DE&I global strategy and a Head of
DE&I appointed to lead this agenda. We
established a Group-wide DE&I Council
responsible for ensuring focus on and
progress against our DE&I plan. The
Council is chaired by one of our Non-
Executive Directors and is overseen at
Board level by our People Committee. All
of these steps are aligned with our Group
DE&I Policy, which can be found on our
corporate website: www.homeserveplc.
com/media/sgznnesr/hs-dei-policy-vs-
2-0-apr-2022.pdf
Our established employee resource
groups are central to driving our DE&I
plans at a grassroots level and these
groups continue to engage employees
with diversity initiatives as well as raise
awareness through the promotion of
events throughout the year.
At a senior level, we have identified
a best-in-class executive level DE&I
programme to support our most senior
leaders, which we intend to run in FY23.
The programme aims to build confidence
and understanding around DE&I, which
is crucial to delivering long lasting and
significant cultural change.
Linked to our DE&I strategy we have
a robust communications plan to
ensure that we have a consistent and
clear narrative on DE&I both internally
and externally. This in turn improves
understanding, drives momentum, and
increases employee engagement and
advocacy.
We are confident that our new strategic
approach to DE&I, led by our Board and
supported by our DE&I Council, and our
employee resource groups, will accelerate
our DE&I ambitions and lead to continued
business success.
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
26
HomeServe plc Annual Report & Accounts 2022
26
Strategic report
Health & Safety
Health and Safety (H&S) at HomeServe remains paramount, with our continued aspiration
being to operate with minimum risk. Across our organisation we drive a positive health
and safety culture, aim to implement continuous improvement in H&S performance,
conduct regular training programmes, and have robust processes and systems in place to
identify, control, mitigate and manage any H&S related risks.
David Bower, CFO, is the Board Director responsible for H&S. HomeServe’s H&S Policy
is set at a Group level where the objective is to provide support, challenge, share best
practice and provide updates to the Executive Directors and Audit & Risk Committee
three times a year, with a H&S report being provided to the Board twice a year,
highlighting issues, trends, and new initiatives. Local HR and operations directors have the
responsibility to lead, champion and deliver the H&S Policy and framework locally and
in newly acquired businesses. Governance and oversight of H&S activity, risk mitigation,
incident trends and strategic objectives is managed within the local subsidiaries and
escalated through Group reporting processes.
The Covid-19 pandemic significantly reduced our accident rates during FY21, largely due
to a reduced number of vehicles on the road and a limited number of employees working
from office locations. FY22 has seen the businesses adopt hybrid working and working
practices beginning to normalise, however Covid-19 and the unique circumstances it
presented has made a year-on-year comparison more challenging.
The Accident Frequency Rate and Lost Time Injury Rate are industry best practice
measures provided by the UK regulator HSE. These 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 rates (total number of reportable incident/total worked x
200,000): Number of reported incidents per 200,000 employee hours worked)
FY19
FY20
FY21
FY22
HomeServe UK
7.39
5.59
3.41
4.56
HomeServe North America
2.08
3.44
3.11
3.36
HomeServe France
5.93
5.16
4.40
6.23
HomeServe Iberia
2.30
2.22
1.06
2.44
Checkatrade
10.96
5.77
—
—
Habitissimo
2.89
2.08
—
—
eLocal
n/a
n/a
n/a
—
Lost time injury frequency rates (total number lost time accidents x 200,000
divided by total headcount x average hours per month per employee including
average overtime)
FY19
FY20
FY21
FY22
HomeServe UK
2.17
1.55
1.05
1.63
HomeServe North America
1.32
2.45
1.58
1.50
HomeServe France
2.06
3.05
3.06
3.74
HomeServe Iberia
0.94
1.34
0.51
1.51
Checkatrade
5.32
2.02
—
—
Habitissimo
3.85
1.56
—
0.71
eLocal
n/a
n/a
n/a
—
Fatalities
Across our businesses there were no fatalities this year.
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.
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.
A uniting thought around all of
our community endeavours is the
importance to people of their homes.
Responsible business continued
Communities
People continued
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
27
HomeServe plc Annual Report & Accounts 2022
27
Strategic report
Corporate responsibility
programmes
One of our most established programmes
is the HomeServe Foundation,
HomeServe’s registered charity. It is
focused on tackling the UK skills shortage
in the trades sector. The Foundation
has set its target to create 25,000
apprentices in the UK by 2025. This year
the Foundation launched its ‘Try a Trade’
schools engagement programme working
with over 500 students in 15 different
schools so far, and its free Apprenticeship
Matching Service for SMEs.
The North American team’s HomeServe
Cares Foundation (HSCF) is in its second
year of operations. It is a grant programme
designed to help communities improve
the quality of life for their residents.
This year each of our EMEA businesses
introduced their own community
programmes. In Spain, the team
introduced Llevando Sonrisas (Bringing
Smiles). It enables employees to get
support for their chosen causes within
the pillars of the programme: taking care
of people’s homes, helping vulnerable
groups, the environment, and building
healthy habits. France launched their new
CSR strategy, Empreinte 2030, focused
on three pillars: the customer, our social
footprint, and the environment. Our
UK business launched their Charity and
Community Strategy, which enables
employees to make a difference
individually, locally, and nationally. The
business chooses one national charity
partner, our regional offices choose a local
partner, and then individuals can support
causes through the Nominate a Good
Cause platform.
Long standing partnerships
In addition to their charity programmes,
many of our businesses have long
standing partnerships with charities close
to their hearts. In Spain, the team works
closely with the Down Madrid Foundation,
the Spanish Federation of Food Banks,
and SOS Children’s Villages. Our French
business is working with Habitat &
Humanisme for the seventh year. The
UK team continues to be a Cornerstone
Employer.
Governance
Financial statements
Other information
Ukrainian appeal
In light of the recent humanitarian crisis
in Ukraine, many of our HomeServe
businesses set-up appeals to raise money
for this important cause. In total we have
raised £14,445.
HomeServe plc Annual Report & Accounts 2022
28
HomeServe plc Annual Report & Accounts 2022
28
Strategic report
Responsible business continued
Environment
Participating in the transition
to a lower carbon future
Introduction
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.
We recognise that our management
of environmental issues is important to
our stakeholders and to our long-term
growth. Our business activities result in
both direct and indirect environmental
impacts, which we are committed to
reducing through ambitious goals and
timely action. We also believe that we
can enable positive impacts through the
products and services we provide and be a
key player in the Net Zero transition.
Our Group Environment Policy, which
includes our climate considerations
and targets, is available on our
website at: www.homeserveplc.
com/media/2iwmkpts/homeserve-
environment-policy-jan-22.pdf
Making our house greener
To make our house greener we set Scope
1&2 and Scope 3 GHG emission reduction
targets and have committed to verify these
with the Science Based Targets initiative
(SBTi) during FY23. For more information
on our targets see the Metrics and targets
section on page 31.
We have identified a number of actions we
will need to take to achieve the reduction
in Scope 1 & 2 (our direct emissions)
including:
• All offices procuring renewable
electricity by 2030
• Implementing energy efficiency
measures in our facilities (such as
upgrading cooling systems)
• Transitioning our fleet to electric
vehicles.
Our UK Membership business has the
biggest fleet in the Group (currently c.750
vans) and during the year, they completed
a feasibility study on the use of electric
vehicles and agreed their vehicle transition
plan. The first two electric vans were
delivered in January 2022 and the plan
assumes that they will fully transition to
an electric fleet by 2030 depending on
vehicle and infrastructure availability.
Regarding our Scope 3 (upstream and
downstream supply chain emissions),
we have identified that emissions from
installed heating are the main source
of our climate impact – accounting for
around 80% of our Scope 3 emissions. As
a result, the transition from fossil fuel-
based heating to greener alternatives
(such as heat pumps) will be key to our
decarbonisation pathway. In order
to achieve our Scope 3 target, our
internal analysis indicates that we
will need to convert around 50% of
residential heating sales to heat pumps
by 2030. Our HVAC businesses are
actively considering how this will be
achieved. During the year we acquired
a specialist heat pump installation
business in France, and we are seeking
similar opportunities in our other
territories as part of our HVAC buy and
build strategy.
Helping customers make their
homes greener
We know that part of our responsibility
to the environment is about helping to
make our customers’ homes greener,
and making green the easier choice.
We are investigating different solutions
and this year we made progress in the
following areas:
• HVAC as a Service launched in New
York State. HVAC as a Service will
make replacing and maintaining
HVAC equipment more financially
manageable, which will enable
some consumers to choose
greener HVAC options. Improving
homeowners access to HVAC
equipment will also better prepare
customers’ homes for the weather
impacts of climate change. Our
French HVAC businesses are
leading the way in the promotion of
alternative energy sources, which
accounted for 60% of installations
in the period.
• HomeServe’s installation and
maintenance proposition for
domestic electric vehicle charging
is now available to 9m households.
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
29
HomeServe plc Annual Report & Accounts 2022
29
During the year, the Board has considered
and approved our Scope 3 emissions
target and received updates on various
workstreams. It has been agreed that
during FY23, we will expand the remit of
the Board’s People Committee and it will
become the ESG & People Committee
thereby improving the Board’s oversight
of ESG matters. The Group Corporate
Responsibility Committee will become
the ESG Forum and will be used to
develop plans and facilitate the sharing of
experience and best practice across our
businesses.
Management’s role
The management teams in each of our
businesses are responsible for managing
the climate-related risks and opportunities
faced by the Group on a day-to-day basis
and for delivering on actions. During the
year, there has been particular focus on
identifying and defining the key risks faced
by each of our businesses and in our
HVAC businesses on how we can provide
greener heating alternatives.
Strategy
We believe that the Net Zero transition
will create multiple opportunities for us
to support our customers to improve
their homes and adopt solutions that will
create value for them as well as reduce
their climate impact. To support our
customers, we will need to find innovative
solutions and services and ensure that our
organisation and its people can develop in
terms of both strategy and skills.
During the year, we completed a detailed
review of climate-related scenarios in
terms of both risks and opportunities
from a Group-wide perspective. An
initial longlist was developed following
workshops and interviews with key
stakeholders across HomeServe’s
businesses. Interview attendees included;
the CFO, Company Secretary and the
Global Managing Director, HVAC.
Following the development of the longlist,
a prioritisation exercise was undertaken to
identify which risks and opportunities have
the potential to have the most material
impact on the Group. Multiple climate
scenarios were used to assess the climate-
related risks and opportunities, including
those aligned to limiting the rise in global
temperature to well below 2-degrees.
Additionally, scenarios were included
in the analysis to assess current policy
commitments, as well as the potential
Task Force on Climate-related Financial Disclosures
The Group has complied with the requirements of the Financial Conduct Authority’s
Listing Rule 9.8.6R(8) by including climate-related financial disclosures consistent with
the TCFD recommendations and recommended disclosures except for the following
matters; 1b management’s role in assessing and managing climate-related risk and
opportunities; 2b impact of climate-related risks and opportunities on the organisation’s
businesses, strategy, and financial planning; 4a the metrics used by the organisation
to assess climate-related risks and opportunities in line with its strategy and risk
management process; 4c the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets.
This is our first year of reporting and we recognise that we have areas to further develop
to meet the TCFD requirements. Our progress so far is summarised in the table below.
Over the coming reporting cycles, we intend to progress our climate-related risk and
opportunity workstreams and aim to meet more of the TCFD objectives. These will
include developing a carbon emissions reduction pathway and monitoring process,
developing a clearer structure for management’s role in managing climate-related risks
and opportunities, and further exploring the opportunities we have identified.
Disclosure objective
Our progress
Compliance status
Governance
Structure in place to provide Group-
wide oversight of climate risks and
opportunities. Individual business
units manage their own day to day
climate risks. Read more on page
29.
Work in progress – Board oversight
is clear but management’s role
needs further development.
Strategy
This year we undertook a detailed
review of the impact of a number of
climate-related scenarios. We detail
our top three risks and opportunities
on page 30.
Work in progress – more work
is needed on understanding the
quantitative impact on business
strategy and financial planning and
on different scenarios.
Risk management
Climate change was identified as
a Global Enterprise Risk this year,
which means that it will have regular
Group oversight from the Audit &
Risk Committee. Read more about
how we identify and manage risk
on page 32 and more about our
Climate change risk specifically on
page 33.
Fully consistent.
Metrics and targets
We have set targets in respect of
our Scope 1, 2 and 3 emissions
and have committed to verify
them with SBTi. We are currently
developing processes for tracking
and monitoring our targets. Read
more about this on page 31.
Fully consistent in respect of
disclosure of Scope 1, 2 and 3
emissions. Further work is needed
to align metrics to our strategy and
to report on performance against
our targets.
Governance
The Board’s oversight
The Board has ultimate responsibility for oversight of climate-related risks and
opportunities. David Bower, CFO, is the nominated Director for activity on an operational
basis. During the year, he was supported by the Group Corporate Responsibility
Committee which was chaired by the Chairman of the Board and comprised of
representatives from our operating businesses and from a number of Group functions.
The Audit & Risk Committee is responsible for considering climate risk and for reviewing
the content of our TCFD disclosures. The Remuneration Committee is responsible
for determining our Remuneration Policy, including how ESG factors are taken into
consideration in the policy and our incentive schemes. For information on these
committees see pages 86 and 92 respectively.
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
30
HomeServe plc Annual Report & Accounts 2022
30
impacts from physical risks under high
emissions scenarios. Risks have been
assessed on the basis of:
• Likelihood – the probability of a
climate-related risk or opportunity
taking place, considering outcomes
across all scenarios assessed. The
direction of travel of each relevant
scenario parameter was assessed
(i.e., whether under each scenario, a
parameter is projected to increase,
decrease, or not change).
-
For transition risks and opportunities,
projections based on current
commitments and trends were
compared to the accelerated
transition aligned to a 2-degrees,
Paris Agreement aligned scenario.
-
For physical risks and opportunities
projections were based on current
commitments and trends were
compared to a RCP8.5 scenario with
failure of climate mitigation actions
and correspondingly high emissions.
• Velocity – assessing the time period
in which the exposure to each climate
risk or opportunity is expected to
become significantly different to today.
The purpose of this measure is to
assess how fast external pressures are
changing. Velocity was assessed using
the following time horizons;
-
Present – between 2021 and 2024
-
Short-term – between 2025
and 2029
-
Medium-term – between 2030
and 2034
-
Long-term – beyond 2035.
• Materiality – the annual financial
impact of each identified climate-
related risk and opportunity was
estimated. To assess financial
materiality, the relationship between
the driver of each climate-related risk
and opportunity (e.g., the external
climate scenario), and HomeServe’s
financial data was modelled. In most
instances, the relationship between
the scenario parameter and impacted
value driver was directly correlated, in
that one would change because of a
change in the other. To understand
and compare the relevant materiality
of these financial impacts, thresholds
were developed based on HomeServe’s
risk management financial materiality
thresholds.
The nature of assessing climate-related risk and opportunities means that the
assessment undertaken is not without its limitations. Some of the key challenges faced
by HomeServe throughout this process were associated with the estimation of financial
materiality and use of climate projections in the prioritisation of risk.
The top three risks and opportunities are set out below:
Risks
Time
horizon
Description and mitigations
Severe
weather
Short to
Medium-
term
The expected increase in the frequency and severity of
storms and floods could lead to a range of challenges for
our operation. For example, we could see the number of
claims increasing, supply chain disruption and difficulties
in scheduling repairs. To mitigate this, we will be working
to understand the local impacts of extreme weather
events and increasing the flexibility and capacity of our
employed and sub-contractor network.
Capability
and
capacity
gap for the
installation
of heating
alternatives
Short-
term
Our HVAC businesses could face a shortage of skilled
engineers as low carbon technologies are deployed and
replace conventional heating technologies. To mitigate
this risk, we are engaging with suppliers, installers, and
partners to understand the projected market, including
which technologies are most likely to be adopted. In
addition, we are working, through the HomeServe
Foundation, to increase apprenticeships.
Climate
regulation
Medium-
term
Emerging regulation could impact us in a number of
ways, including increased operating costs as a result of
higher energy, fuel, and parts. To mitigate this we have set
emissions targets and are working on a decarbonisation
strategy.
Opportunities
Time
horizon
Description
Installation
of heating
alternatives
Short-
term
The commercialisation and deployment of low carbon
heating solutions will present opportunities for installation,
maintenance, and cover. Uptake of new technologies will
be driven by both regulation and incentivisation.
New
products
and
services
Short-
term
The low-carbon transition will create more low-carbon
markets which will create opportunities for HomeServe.
A key example of this is the EV charging market which is
expected to grow rapidly over the next decade. Detailed
analysis and pilot activity is underway in a number of our
markets and we will report on this in future years.
Weather
related
increases in
demand for
products
and
services
Long-
term
Warmer temperatures in some regions as a result of
climate change may result in greater demand for home
cooling equipment. HomeServe can play a role in helping
customers to reduce the impacts of warmer temperatures
through our HVAC services.
Risk Management
An overview of our risk management framework is set out on page 33 including our
processes for identifying, assessing, and managing risks. The section above provides
further detail of how we assess the size and scope of the identified climate-related risks.
During the year, climate was added as a Group Enterprise Risk (GER) and as such is
being managed in the same way as other significant risks. The Audit & Risk Committee
considers all Group Enterprise Risks at each of its meetings.
Responsible business continued
Strategic report
Environment continued
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
31
HomeServe plc Annual Report & Accounts 2022
31
Strategic report
Governance
Financial statements
Other information
At a Group level, we have identified three
initial risks and three initial opportunities
(detailed opposite). These high-level risks
and opportunities have been shared with
local businesses and they have been asked
to consider the climate and environmental
risks that will be relevant to them and
to add them to their local risk registers.
The relevant risks at a local level will not
necessarily be the same as those identified
at a Group level and will differ from
business to business.
Metrics and targets
To support our carbon reduction
ambitions we have agreed science-based
targets for our own operations (Scope
1&2), aligned to limiting global warming to
1.5-degrees, and our value chain (Scope
3), in line with a 2-degrees temperature
pathway. For both of these targets our
base year is FY22 and our reduction target
will be set to be achieved by 2030. We are
committed to seeking approval of these
targets by the SBTi during FY23.
To achieve these targets, we will be
tracking and reporting on our carbon
emissions on an annual basis. For our
Scope 1&2 emissions we track our gas,
electric and vehicles’ fuel. For Scope
3 we track the categories which are
relevant to our business, these include:
purchased goods and services; capital
goods expenditure; fuel and energy
related activities; upstream transportation
and distribution; waste generated in
operations; business travel; employee
commuting; use of sold products; and
end-of-life treatment of sold products.
During FY23 we are looking to develop a
more detailed carbon emissions reduction
plan, with short-term goals to help achieve
our targets, and regular monitoring and
tracking of key metrics.
This year was the first time we responded
to the CDP climate change questionnaire,
and we received a score of B-. We look
forward to tracking our progress over
subsequent years of participation in
the CDP.
Greenhouse Gas Emissions
Scope 1 & 2
Group
UK
Tonnes of
CO2e FY22
Tonnes of
CO2e FY21
Tonnes of
CO2e FY22
Tonnes of
CO2e FY21
Scope 1 Combustion of fuel and operation
of facilities
19,725
13,698
5,848
6,181
Scope 2 (location-based) Electricity, heat,
steam and cooling purchased for own use
1,701
1,574
541
347
Scope 2 (market-based) Electricity, heat,
steam and cooling purchased for own use
2,463
1,995
961
561
Total scope 1 & 2 (location-based)
21,426
15,272
6,389
6,528
Tonnes of CO2e per employee
2.48
2.05
2.02
2.13
Group
UK
KwH FY22
KwH FY21
KwH FY22
KwH FY21
Combustion of fuel and operation
Combustion of fuel and operation
of facilities
of facilities
80,877,971
59,359,630
59,359,630
22,554,989
26,745,195
26,745,195
Electricity, heat, steam and cooling
Electricity, heat, steam and cooling
purchased for own use
purchased for own use
6,442,998
5,256,707
5,256,707
2,243,377
1,489,254
1,489,254
Total
Total
87,320,969
64,616,337
64,616,337
24,798,366
28,234,449
28,234,449
We have reported on all of the emissions sources required under The Companies Act
2006 (Strategic Report and Directors’ Report) Regulations 2013 and the Companies
(Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018 – commonly referred to as Streamlined Energy and Carbon Reporting
(SECR). Our Scope 1 & 2 footprint has been verified to the ISO14064-3 standard by The
Carbon Trust. Our Scope 1 emissions exclude refrigerant gas data as it was not feasible to
collect and has a negligible effect on our total emissions.
Scope 3
Our Scope 3 data has not yet been verified, due to the timing of this report. However,
we present our initial Scope 3 footprint below, and are in the process of having this data
verified to the ISO14064-3 standard by The Carbon Trust. If the verification highlights any
issues with our initial footprint, we will restate our data in next year’s Annual Report.
Category
Total emissions 2022 (t CO2e)
1a: Purchased goods and services (product related)
25,050
1b: Purchased goods and services (non-product related)
63,852
2: Capital goods
9,005
3: Fuel and energy related activities
5,655
4: Upstream transportation and distribution
14,665
5: Waste generated in operations
43,867
6: Business travel
1,667
7: Employee commuting
8,001
11: Use of sold products
838,250
12: End-of-life treatment of sold products
132
Total
1,010,144
In accordance with GHG protocol we also measure our outside of scope emissions. The
below biogenic CO2 emissions relate to the customer use-phase of wood/pellet stoves
sold by our operations in France:
Category
Total out of scope emissions 2022 (t CO2e)
Biogenic emissions
42,189
Strategic report
HomeServe plc Annual Report & Accounts 2022
32
Risk management at
HomeServe forms a
significant part of the overall
governance structure. The
overall risk policy and process
is set at Group level with
the implementation and
ownership being adopted by
our local businesses.
HomeServe’s framework 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. It is
designed to support the Group, and its
individual businesses, in making well-
informed decisions as well as providing
reasonable levels of assurance (total
assurance is not attainable) that risks
are being correctly identified and are
then subject to robust management. 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.
The Board formally reviews and satisfies
itself on the effectiveness of the risk
management framework by delegation to
its Audit and Risk Committee. The Group
risk function reports to the Audit and Risk
Committee three times a year to enable it
to do so.
HomeServe’s risk
management process
HomeServe’s individual businesses
consider both operational and strategic
risks in the risk management process.
Strategic risks consist of identifying both
the inherent external and internal risks the
organisation faces, with operational risks
representing the potential inadequacies in
the internal governance and management
processes in place.
The key components of HomeServe’s risk
management process are:
• HomeServe’s purpose, vision and
values, which facilitate its strategy and
inform business objectives
• Principal risks and uncertainties
facing the Group are identified by
the Executive Directors and where
applicable implemented as Group
Enterprise Risks (GERs) across the
local businesses. Group-wide risks
and mitigation processes are regularly
reviewed by the Group Audit and Risk
Committee
• Risks are consistently identified,
assessed, prioritised, mitigated,
controlled, monitored and reported
through local Risk Committees and
at a Group level to the Executive
Directors and the Group Audit and Risk
Committee
• Oversight, communication and risk
management support is provided to
local businesses by the Group risk
function, particularly with regard to
risks likely to have more significant
impact on the Group’s overall
objectives.
Our risk assessment
Assessment of risk should look at what
could go wrong and not focus on whether
the risk has been entirely mitigated.
HomeServe’s assessment of risk is
approached from a top down and a
bottom up perspective. Group Enterprise
Risks (GERs), which are those risks that
directly link to our business model and
strategy, are identified through our
Executive Directors.
At a local level, each business identifies
strategic and operational risks which are
captured on detailed risk registers.
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
an inherent and residual basis and rated as
red, amber or green. A risk, once identified,
can be managed within HomeServe’s
risk appetite through controls, whether
manual or automatic and the effectiveness
of controls will manage the impact
and likelihood of a risk crystallising.
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 management governance
Risk registers are reviewed at local
committees and boards across the Group.
The Executive Directors and the Audit &
Risk Committee having regular oversight
of both the Group Enterprise Risks and the
principal risks identified by each business.
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.
The specific responsibilities and activity
carried out by local risk teams and the
Group risk function are summarised by the
“three lines of defence” framework set out
opposite. This is widely recognised as best
practice across multiple industry sectors.
Using the approach set out opposite, the
Board has assessed the principal risks
(“Group Enterprise Risks”) faced by the
Group and is satisfied that appropriate risk
mitigation plans are in place and are being
implemented.
Principal risks and uncertainties
Vision,
mission and
values
S
t
r
a
t
e
g
y
B
u
s
i
n
e
s
s
o
b
j
e
c
t
i
v
e
s
G
r
o
u
p
E
n
t
e
r
p
r
i
s
e
R
i
s
k
s
I
d
e
n
ti
f
y
A
s
s
e
s
s
M
it
ig
at
e
&
c
o
n
t
r
ol
R
e
vi
e
w
a
n
d
r
e
p
o
r
t
Communicate
Communicate
Our tolerance to risk
The Group’s risk appetite is subject to an
annual review of its definition, content and
criteria for assessment scores. The Board’s
assessment of risk appetite is guided by
HomeServe’s vision to become the world’s
most trusted provider of home repairs and
improvements, and by its purpose to make
home repairs and improvements easy.
HomeServe’s risk appetite is comparatively
low. This recognises; firstly, its status as
a plc which requires strong governance
and reputation and, secondly, its regulated
status in certain markets which requires
compliance with local laws, rules and
guidance.
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
33
Changes in FY22
Covid-19
Although the continuing public health
response to Covid-19 has begun to shift
from treatment as a pandemic to being
endemic across most of the territories
in which the Group operates, it remains
an area of focus. Due to differences
by country in the specific approach of
national governments, and sub-national
public bodies, the risk and response
to Covid-19 continues to be managed
locally with consideration of the specific
risk environment for each business. Any
impact seen is then reported to both the
Executive Directors and the Audit and Risk
Committee.
Climate risk
Governments and corporates globally
are facing up to the challenge of climate
change. Climate change is both a risk and
opportunity for HomeServe.
The expected increase in the frequency
and severity of severe weather such
as storms and floods could lead to a
range of challenges for our operations
and emerging regulation could impact
HomeServe in a number of ways,
including increased operating costs as a
result of higher energy, fuel and parts. In
addition, the HVAC businesses could face
a shortage of skilled engineers as low
carbon technologies are deployed and
replace conventional heating technologies.
More details of the risks and opportunities
identified by HomeServe can be found in
the TCFD disclosure on page 29.
HomeServe are working to understand the
local impacts of extreme weather events
and to increase the flexibility and capacity
of its employed and sub-contractor
network. Additionally, HomeServe have
set emissions targets and are working on
plans to deliver the targets, as well as a
wider decarbonisation strategy. This will
include HomeServe’s HVAC M&A strategy,
which is targeting the addition of specific
capabilities which will enable HomeServe
to address both market and local regulatory
changes (such as heat pump installers).
Critical risks
In the 2021 Annual Report & Accounts,
HomeServe identified a number of risks as
critical risks whereby failures in any one of
the business units would result in a change
in the risk environment at a Group level.
Local businesses are 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.
To further strengthen the overall control
framework, during FY22 these critical
risks were formally recognised as Group
Enterprise Risks and, as such, data privacy
and health and safety are now included
below as Group Enterprise Risks.
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, for
example, following a material acquisition
or to implement plans to reduce any risk
which exceeds the appetite threshold. 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.
Plc Board
Audit & Risk Committee
Risks: Strategic, Operational, Financial
Executive Directors’ meeting
Three scheduled risk discussions per annum
• Risk discussion chaired by the CFO
• Composed of Executive Directors
• Discussions are reported on at the Audit & Risk Committee.
Line 1
Business Unit Operations
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.
Line 3
Independent
Internal Audit &
Assurance
• Review 1st and 2nd
lines
• Independent
testing & challenge
& oversight of Lines
1 & 2.
Line 2
Risk, Control & Compliance Functions
Risk framework
Other
external
bodies e.g
External
audit,
Regulators
Strategic report
HomeServe plc Annual Report & Accounts 2022
34
Principal risks and uncertainties continued
Information security & cyber resilience
Overview
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.
Mitigations
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 secure configurations and
processes, access controls, appropriate security
tooling and effective communication of policies
and procedures to all employees.
FY22 update
The Group’s businesses continued to invest
in security capabilities as part of strategic
activities in response to evolving threats,
with a focus on ensuring any new solutions
support its continued hybrid working
arrangements. During the year, a business in
Spain that was acquired in FY21 experienced
a ransomware attack. This was contained
within that business, demonstrating the
importance of the Group’s commitment to,
where necessary, increasing the security of
acquisitions prior to integrating operations
with other Group businesses. In addition,
wider capabilities and relationships across
the Group were leveraged to help respond
and recover, as well as accelerate delivery of
security improvements.
Data privacy
Overview
In the operation of its businesses HomeServe
collects customer, employee, commercial
and other data. Without appropriate mitigating
controls there is a risk that such data could be
inappropriately collated, processed, stored or
disclosed, or indeed lost or compromised.
This could result in business disruption,
reputational damage and financial loss as well
as regulatory action resulting in additional
costs, loss of customers and potential loss of
partners.
Mitigations
HomeServe utilises several mitigating controls
to manage the data privacy risk. Expertise
within the local businesses is supported by a
detailed data protection framework designed
to promote best practice for the processing
of personal data. In addition, oversight and
support is provided through a centralised Group
function. The Group function continues to
support new acquisitions in the implementation
of the framework. Oversight is supported
through monitoring controls, key risk indicators,
governance committees and the audit function.
FY22 update
Over the last year, the continued focus on
the management of data has resulted in
an overall reduction in the risk exposure
across the Group. As such, all businesses
are currently operating within the Group’s
appetite for this risk.
Strategic risks
Competition
Overview
In any of HomeServe’s markets, a successful
new entrant or an existing competitor
adapting more quickly to changing customer
demands and needs could adversely impact
its business and its financial results. This could
result in fewer customers, lower 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, for example, Whole
Home Warranty
• Existing competitors moving into other
geographies
• New entrants, for example, Amazon or
Google investing heavily to enter the
home services space with new products or
technologies
• Incumbent competitors to Home Experts
in the UK, for example, Rated People,
MyBuilder.
Mitigations
HomeServe demonstrates to utilities that
they can benefit more by partnering with
HomeServe due to its long-term investment
horizon.
Regular market reviews in each business identify
new entrants and increases in competitor
activity, for example, aggressive pricing
initiatives.
Agile product development responds to
changing consumer needs. Shared learning
between its markets, analysing consumer
trends and developing leading products and
services.
HomeServe believes it has the winning Home
Experts model in Directory Extra which,
alongside Checkatrade, Habitissimo is now
implementing. Continued learning and idea-
sharing happens between the Home Experts
businesses.
FY22 update
During the year American Water Works
Company, Inc. (“American Water”) reached
an agreement to sell its Homeowner Services
Group (“HSG”) to funds advised by Apax
Partners LLP. HSG has historically been a key
competitor of HomeServe’s Membership
business in North America. Whilst it could
be anticipated that HSG may be more
aggressive under its new owners, HomeServe
remains the clear market leader in the
North American home assistance market.
Furthermore, HomeServe’s differentiated
solutions for utilities and high levels of service
for homeowners continues to be a source of
competitive advantage.
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
35
Risk score movement from the prior year
No change
Increased
Reduced
New
Key sources of value
Partnerships
Capacity for innovation
Customer obsession
Trades network management
Financial resources and expertise
Climate risk
Overview
Governments and corporates globally are
facing up to the challenge of climate change.
Climate change is both a risk and opportunity
for HomeServe.
The expected increase in the frequency and
severity of severe weather such as storms and
floods could lead to a range of challenges for
our operations and emerging regulation could
impact HomeServe in a number of ways,
including increased operating costs as a result
of higher energy, fuel and parts. In addition,
the HVAC businesses could face a shortage of
skilled engineers as low carbon technologies
are deployed and replace conventional
heating technologies. More details of the risks
and opportunities identified by HomeServe
can be found in the TCFD disclosure on page
29 of the Annual Report & Accounts.
Mitigations
HomeServe are working to understand the
local impacts of extreme weather events and
to increase the flexibility and capacity of its
employed and sub-contractor network.
All of HomeServe’s international businesses
maintain (and regularly test) business continuity
plans.
HomeServe have set emissions targets and are
working on a decarbonisation strategy.
HomeServe’s HVAC M&A strategy is targeting the
addition of specific capabilities which will enable
HomeServe to address both market and local
regulatory changes (such as heat pump installers).
HomeServe are engaging with suppliers, installers
and partners to understand the projected market,
including which technologies are most likely to
be adopted. In addition, HomeServe are working,
through the HomeServe Foundation, to increase
apprenticeships in relevant trades.
FY22 update
HomeServe have set Group wide targets for
emissions and are working on plans to deliver
the targets.
HomeServe have identified high-level
risks and opportunities, and these have
been shared with local businesses. Local
businesses are considering how these impact
on them and what actions are needed to
mitigate the risks.
To monitor and measure performance
against the decarbonisation journey, an
Environment Management System is being
developed.
M&A strategy
Overview
HomeServe has an active M&A strategy
focused on two primary areas; Membership
policy books and a buy and build strategy to
grow its HVAC footprint.
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.
Mitigations
• Strict criteria when building a prospects
pipeline.
• Independent advisers engaged in due
diligence processes.
• 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.
FY22 update
There has been no change to the underlying
risk of HVAC M&A, with all acquisitions
continuing to be appraised by dedicated M&A
teams, and transactions approved by local
and/or plc Board. Furthermore, during the
year the plc Board approved a formal set of
target investment guidelines for HVAC M&A
across the Group.
Strategic risks
Operational risks
Digital transformation
Overview
As distinct from technology investment
(below) digital transformation relates
principally to interactions with customers
(be they homeowners or trades), ensuring
HomeServe offers a multi-channel, multi-
media approach to interact with them and
that it does 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.
Mitigations
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.
FY22 update
The use of automation across the
Membership business to enhance the service
levels given to customers continues to be
pursued across the Group. In particular
natural language call automation now
accounts for a sizeable proportion of first
notification of loss (FNOL) calls in both North
America and the UK.
Strategic report
HomeServe plc Annual Report & Accounts 2022
36
Principal risks and uncertainties continued
Operational risks
Regulation
Overview
In its Membership businesses, HomeServe
is subject to regulatory requirements
relating to, for example,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, for
example, anti-corruption, anti-fraud and
bribery and modern slavery. 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 of 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.
Mitigations
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.
FY22 update
In the UK, in line with new FCA requirements
across the general insurance industry, the
Membership business implemented changes
to enable customers to opt-out of auto-
renewal online, in addition to the telephony
and postal channels already available to
them.
In France, the Membership business was
focussed on implementing changes to
certain of its telephony sales processes to
support compliance with new government
regulations which took effect at the
beginning of April 2022.
Underwriting capacity & concentration
Overview
In Membership, HomeServe markets and
administers policies that are underwritten by
independent third-party insurers. HomeServe
acts as an insurance intermediary and does
not take on any material insurance risk.
These arrangements are a core part of
the Membership model and help protect
HomeServe from short-term risk, for
example, 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.
Mitigations
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 every 6 months) reviews with
all underwriters to ensure that current product
performance and trends are understood.
FY22 update
Each of HomeServe’s underwriting
relationships remain strong, with regular
engagement during FY22, and the financial
position of each of the underwriting partners
continues to be very solid.
In the normal course of business, the
regular data sharing and review of actuarial
performance with underwriters continues
to support the underwriting of risks. This is
despite pockets of higher product usage
(associated with higher levels of home
working) and higher average job cost
(associated with a more inflationary macro-
economic environment).
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
37
Partner loss
Overview
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, for example, liberalisation
of energy markets in Spain. Any reversal, for
example 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, for example,
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.
Mitigations
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, for example, France.
FY22 update
In North America, HomeServe continued
to sign new partners at the rate of around
two per week. During the year the business
exited a relationship with a partner with
which it had built a customer book of
c.0.1m, however the business does not see
any wider in-sourcing trend in the North
American market.
In the UK, the business renewed
relationships with four water partners
accounting for 5m households during the
year. Notwithstanding the contraction in the
number of retail energy suppliers caused
by high wholesale prices, the household
coverage the business has via its energy
relationships increased during the year.
In Japan, further partnership agreements
were signed with electric utilities, meaning
HomeServe now has access to around 14m
households in that territory.
Technology investment
Overview
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.
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.
Mitigations
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.
FY22 update
In the UK, following the FY21 decision to fully
impair the eServe CRM system, the business
transferred sales activity back to the existing
system, and all policies have been migrated
back to the existing system. The business
anticipates that the longer-term CRM
solution will be a third-party, cloud-based
offering learning from successful project
implementations elsewhere in EMEA.
In Spain, the business successfully migrated
all customer policies to a Salesforce CRM
system.
In France, the business continued to extend
the rollout of a third-party standardised
enterprise resource planning (ERP) platform
to businesses in its HVAC portfolio.
Operational risks
Risk score movement from the prior year
No change
Increased
Reduced
New
Key sources of value
Partnerships
Capacity for innovation
Customer obsession
Trades network management
Financial resources and expertise
Strategic report
HomeServe plc Annual Report & Accounts 2022
38
Principal risks and uncertainties continued
Failure to deliver strategic growth
Overview
HomeServe has several 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.
Mitigations
The leadership of each of HomeServe’s three
divisions have clarified the combination
of assets and competencies that leads to
repeatable strong operational and financial
performance, and that drives each division
towards its overarching strategic objectives,
in the form of a flywheel. Additionally, the key
behaviours required across the businesses to
deliver those objectives are codified, acting as
a mission statement for all employees.
All new business opportunities are then
assessed against this framework, and
immediately de-selected if they are not
instrumental to turning the flywheel.
In the Home Experts division in particular,
the key value driver across the three different
platforms has been distilled – thereby
helping to guide both assessment of strategic
opportunities and operational priorities.
FY22 update
As the least mature of the Group’s three
divisions, resource is focused on managing
this risk at Home Experts. A quarterly
forum has met during the year, convening
the leaders of each platform, to share
experience from local markets. This has
helped each business further refine its
approach to key strategic decisions.
Operational risks
People
Overview
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, for example, Home
Experts.
The inability to attract, motivate or retain
key talent could impact overall business
performance.
HomeServe has several 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 that previously undertaken by
Hampton Alexander, also play an increasing
role in informing HomeServe’s People
agenda. This ensures HomeServe have the
appropriate diversity of people, experience
and ideas to move the business forward.
Mitigations
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.
FY22 update
HomeServe employed an average of c.8,600
people globally through FY22. 78% of those
people completed the Global People Survey,
returning an engagement score of 75%,
down 3 percentage points on the prior year
but remaining higher than the pre-pandemic
level.
Labour markets in each of the territories that
the Group’s businesses operate in have been
tighter, as the impact of Covid-19 has begun
to move to its endemic phase. Across the
Group this has been seen in slightly higher
rates of attrition, alongside some pockets of
slightly longer lead times in recruitment.
HVAC integration
Overview
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, for example, 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.
Mitigations
Integration plans form part of all business case
approvals.
Post-investment reviews provide learning for
future acquisitions.
Dedicated teams and resources and retention
of key management personnel in the acquired
businesses.
FY22 update
A total of 20 HVAC acquisitions were made
in FY22 across the US, France, Spain, the UK,
Belgium and Germany.
In both the US and France, a number of
portfolio businesses have begun operating
on standardised ERP platforms, with
expected rollout to all portfolio businesses
in time.
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
39
Financial
Overview
Interest rate risk
Fluctuations in interest rates could lead to
HomeServe being exposed to higher interest
costs on its underlying debt obligations.
Credit risk
There is a risk that customers do not pay
monies owed, thereby meaning lower
amounts of cash are recovered relative to
expected receivables.
Liquidity risk
There is a risk that short-term and long-term
funding necessary to meet business needs
and take advantage of strategic priorities
becomes unavailable.
Financial misstatement risk
There is a risk of financial misstatement,
whereby material errors in financial reporting
mean that accounts prepared by HomeServe
do not give a true and fair view of the state of
the Group’s affairs – furthermore exposing
HomeServe to possible reputational damage.
Mitigations
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
designed 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.
Financial misstatement risk
HomeServe manages the risk of financial
misstatement by ensuring that businesses
comply with a toolkit that sets out the
minimum standards on financial control. The
financial results for each business are subject
to reviews on a monthly basis from local
management, Group finance and the
plc Board.
FY22 update
During FY22 HomeServe arranged an
additional £30m of funding for six years via
the US private placement market with a fixed
interest rate of 2.47%.
Health and safety
Overview
In common with other organisations,
HomeServe has an obligation to provide a
safe working environment for its colleagues,
customers and stakeholders. With
HomeServe’s continued growth, through
recent M&A, health and safety has been
added as a new risk to mitigate the potential
increase in risk exposure due to the rise in the
number of HVAC engineers.
An overarching health and safety policy at the
Group level provides support to health and
safety leads in each of the Group businesses
who are responsible for ensuring compliance
with industry regulations, as well as prevailing
standards specific to each territory.
Non-compliance with these standards would
naturally lead to personal injury, substantial
fines and penalties, and reputational damage.
Mitigations
A governance structure is in place, with health
and safety matters being subject to oversight
of the Audit and Risk Committee and, where
applicable, the plc Board.
Strategic Safety & Health Improvement Plans.
Robust health and safety policies and
standards at the Group level, with compliance
required by individual businesses.
Health and safety leads appointed in all
jurisdictions, who have responsibility for
delivering and championing the health and
safety policy and framework locally and in any
newly acquired businesses.
Mandatory training in safe working practices.
FY22 update
Support, oversight and reporting continues
to be provided to the local health and safety
leads within each of the businesses. This
is against a backdrop whereby health and
safety is being managed within appetite in
each of the Group’s businesses.
Operational risks
Financial risks
Risk score movement from the prior year
No change
Increased
Reduced
New
Key sources of value
Partnerships
Capacity for innovation
Customer obsession
Trades network management
Financial resources and expertise
HomeServe plc Annual Report & Accounts 2022
40
HomeServe plc Annual Report & Accounts 2022
40
Operating review
Financial performance
Revenue
Statutory operating
profit/(loss)
Adjusted operating
profit/(loss)
£million
2022
% Chg v. 2021
2022
% Chg v. 2021
2022
% Chg v. 2021 % Chg v. 2021 CCY
North American Membership & HVAC
583.0
+15%
101.7
+24%
117.7
+12%
+15%
UK
337.5
-0%
68.9
n/a
72.9
+1%
+1%
France
152.7
+15%
29.4
+3%
36.4
+2%
+8%
Spain
207.5
+6%
17.6
+20%
20.8
+18%
+24%
New Markets
0.8
n/a
(5.6)
-44%
(5.6)
-11%
-11%
EMEA Membership & HVAC
698.5
+5%
110.3
+656%
124.5
+4%
+7%
Home Experts
155.2
+11%
(9.4)
-62%
4.3
n/a
n/a
Inter-segment 1
(7.4)
n/a
—
—
—
—
—
Group
1,429.3
+10%
202.6
+182%
246.5
+15%
+18%
1 Inter-segment revenue includes transactions with other Group companies removed on consolidation and principally comprise royalty and other similar charges.
The net impact of changes in the Euro and USD exchange rates between FY21 and FY22 resulted in a £47.6m decrease in the reported
revenue and a £6.2m 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.
2 Proportion of total revenue derived from non-Membership activities (UK: HVAC installations and £15.7m in respect of CET, France: HVAC installations, Spain: Repair income and HVAC installations)
3 Average revenue per trade.
Strategic report
ARPT3
2022
2021
Checkatrade
£1,229
£939
eLocal
n/a
n/a
Habitissimo
€831
€511
Group
n/a
n/a
Paying trades (k)
2022
2021
Checkatrade
47
44
eLocal
n/a
n/a
Habitissimo
11
20
Group
58
64
Home Experts KPIs
Contacts (m)
2022
2021
Checkatrade
10.3
8.1
eLocal
3.4
3.6
Habitissimo
1.1
2.0
Group
14.8
13.7
Organic new customer
additions (m)
2022
2021
UK
0.2
0.2
France
0.2
0.2
Spain
0.1
0.1
2022
2021
New Membership
customer additions (m)
1.2
1.0
Membership customers
(m)
4.8
4.7
Net income per
Membership customer ($)
113
108
Policy retention rate
85%
85%
HVAC adjusted operating
profit ($m)
17.8
9.8
North American Membership
& HVAC KPIs
EMEA Membership & HVAC KPIs
Policy retention rate
(%)
2022
2021
UK
79%
78%
France
87%
88%
Spain
80%
83%
France
Spain
UK
FY22
FY21
Spain
France
UK
0.2
0.2
0.1
Non-membership sales
(%2)
2022
2021
UK
10%
4%
France
20%
12%
Spain
74%
71%
Spain
France
UK
10
20
74
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
41
North American Membership & HVAC delivered a strong
financial performance. The strong growth we are seeing is
sustainable, thanks to disciplined management and innovation
focused on the green homes revolution.
$million
2022
2021
Change
Revenue
Net policy income
556.4
510.7
9%
Repair income
110.6
74.9
48%
Membership
667.0
585.6
14%
HVAC installations
121.6
76.0
60%
Other
6.3
4.2
50%
Total revenue
794.9
665.8
19%
Adjusted operating costs
(635.8)
(527.9)
20%
Adjusted operating profit
159.1
137.9
15%
Adjusted operating margin
20%
21%
-1ppt
£million
2022
2021
Change
Revenue
Net policy income
408.7
388.1
5%
Repair income
80.4
57.1
41%
Membership
489.1
445.2
10%
HVAC installations
89.3
57.9
54%
Other
4.6
3.3
40%
Total revenue
583.0
506.4
15%
Adjusted operating costs
(465.3)
(401.4)
16%
Adjusted operating profit
117.7
105.0
12%
Adjusted operating margin
20%
21%
-1ppt
Total customers
2022
2021
Change
Membership customers (m)
4.8
4.7
3%
Water loss customers (m)
0.8
0.6
27%
Total customers (m)
5.6
5.3
5%
Income per customer inc. water loss ($)
99
96
3%
Financial performance
Net policy income grew by 9%. Though customer growth of 3% was more muted due to
the Piedmont policy book sale and the Q4 Omicron impact, average policy holdings per
customer rose to 1.8 (FY21: 1.7), with a resultant higher rate of policy growth at 6%.
Repair income, which partly comprises non-installation jobs completed by HomeServe’s
directly owned HVAC operations, again rose strongly – up 48% – largely reflecting the
impact of a full 12 months’ activity from FY21 acquisitions.
HVAC installation income similarly benefited from the annualisation of FY21 acquisitions,
but also saw good organic growth of 19% in those businesses owned throughout FY21.
Together, this drove 60% growth in HVAC installation revenue on the prior year, with
HVAC as a whole (being both installations and fee for service work captured in the repair
income line) contributing $17.8m (FY21: $9.8m) in adjusted operating profit for the year.
NORTH AMERICAN MEMBERSHIP & HVAC
Membership customers
4.8m +3%
FY22
FY21
4.8m
4.7m
Membership policies
8.7m +6%
FY22
FY21
8.7m
8.2m
Income per Membership
customer
$113 +5%
FY22
FY21
$113
$108
Affinity partner households
73m +10%
FY22
FY21
73m
66m
85% —
Retention rate
85%
85%
FY22
FY21
Strategic report
HomeServe plc Annual Report & Accounts 2022
42
Adjusted operating costs rose by 20%,
slightly ahead of revenue growth, largely
reflecting an increase in marketing
activity during the year. The adjusted
operating margin of 20% was in line with
that delivered in FY20, and 15% growth
in adjusted operating profit was at a level
which further underpins confidence in the
business’s trajectory towards the Milestone
2 target of $230m.
Operational performance
Notwithstanding an impact from Covid-19,
and specifically the Omicron variant, that
came later than seen in other territories,
the North American Membership & HVAC
business continued to execute against
its clear strategy and remains ahead of
its original plan to achieve its Milestone 2
adjusted operating profit target of $230m.
There was strong conversion of the high
quality pipeline of prospective utility
partnerships brought forward from the
prior year. This resulted in new affinity
relationships which, together with
increased household coverage of existing
partners, enable access to an additional
net 7m (FY21: 2m) households. Business
development was aided by a return to in-
person networking with utilities, and the
incremental 7m was after the removal of
c.1m households of Piedmont Natural Gas
Company (“Piedmont”), with whom an
affinity partnership ended during the year,
as previously announced.
North American Membership & HVAC
benefits from strong relationships with
utilities, based on deploying HomeServe’s
customer-centric service offering in a way
that aligns with many of a utility’s core
objectives, whether they are providers
of water or energy. Key initiatives to
strengthen this proposition gained
further traction during the year. In water,
Operating review continued – North American Membership & HVAC
– the key driver of revenue and profit
progression.
The business continued to
differentiate its value proposition to
customers through high levels of
service, with the customer satisfaction
rating (scored out of five) advancing
to 4.80 for the year (FY21: 4.71).
The business also further deployed
technology to aid the customer
experience, with natural language
call automation assisting over 2m
customers during the year.
With a portfolio of 19 locally branded
companies (“LBCs”) acquired over
the last four years, the HVAC buy and
build strategy is furthest advanced in
North America. LBCs completed 19k
jobs for Membership policyholders
during the year (FY21: 14k), with a
further five acquisitions during the
year meaning there are now 0.4m
policies across the portfolio. A further
two LBCs were migrated to Service
Titan, a cloud-based system to handle
operations and marketing, during
the second half, with 91% of the
LBC portfolio by revenue live on the
system at the end of FY22.
The HVAC offering means the
North American business has the
assets and capabilities to support
homeowners with more efficient
and green equipment as the
residential decarbonisation transition
accelerates. During the year the
business successfully developed and
trialled “HVAC as a Service” with a
large utility in New York state, with
homeowners getting access to new
more efficient equipment, a repair
plan and the facility to track energy
savings for a fixed monthly fee, which
aids affordability compared to a large
initial outlay. With many energy utilities
having carbon reduction objectives,
this new service offering further
demonstrates the high alignment
between the Membership offering
and the goals of utilities.
the business continued to highlight the
benefits of its water loss cover product
(acquired as Servline in December 2019),
which offers utilities a fully insured solution
in the event of abnormally high costs due
to water leakage from a homeowner’s
system. Water loss customers grew
strongly by 27% to 0.8m (FY21: 0.6m). The
offering is a particularly effective way to
engage municipal water providers, and
the business already has rights on over
30% of the 0.8m water loss customers
to market its fuller suite of products. In
energy, the electric vehicle (“EV”) charging
point solution which the business has
developed enabled three large energy
utilities to offer their customers EV charge
point installation and protection, providing
a gateway to a new relationship with a
4.6m household utility (incremental to the
net 7m affinity partner households signed
during the year), as well as an expanded
relationship with an existing partner.
The core proposition of a hassle-free,
swift and cost-effective solution for home
emergencies continued to resonate
strongly with homeowners as well as
utilities. Organic gross customer additions
of 1.2m (FY21: 1.0m) all came from existing
utility partnerships launched prior to
FY22, as launch marketing with utilities
signed in-year were delayed – largely
due to Omicron. The rate of customer
additions in the second half was impacted
somewhat by higher employee absence in
partner call centres due to Omicron, whilst
the completion of the disposal of the first
tranche of policies back to Piedmont also
drove more muted customer growth.
Existing customers continued to upgrade
their policy holding through the suite of
products however, and higher levels of
marketing were re-directed into this cross-
sell channel than the prior year, resulting
in continued strong policy growth of 6%
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
43
The EMEA division comprises 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.
Each of the UK, France and Spain are pursuing a strategy to broaden their business to
encompass the complementary offerings of Membership, HVAC and Claims Assistance.
£million
2022
2021
Change
Total revenue
698.5
667.2
5%
Adjusted operating costs
(574.0)
(547.7)
5%
Adjusted operating profit
124.5
119.5
4%
The UK business made good progress in the early stages of the
transformation plan set out in May 2021.
£million
2022
2021
Change
Revenue
Net policy income
212.5
233.2
(9%)
Repair income
95.7
80.3
19%
Membership
308.2
313.5
(2%)
HVAC installations
17.2
12.1
42%
Other
12.1
13.3
(9%)
Total revenue
337.5
338.9
(0%)
Adjusted operating costs
(264.6)
(266.4)
(1%)
Adjusted operating profit
72.9
72.5
1%
Adjusted operating margin
22%
21%
+1ppt
Financial performance
As anticipated, net policy income declined 9% driven by the lower customer base.
Notwithstanding the lower base of customers and policies, repair income grew by 19%
on the prior year – largely reflecting the benefit of a five-month contribution from CET,
which delivered in-year revenue (all captured in the repair income line) of £15.7m.
HVAC installation revenue grew 42%, largely reflecting a continuing recovery in
installation volumes in the HomeServe branded business from a heavily pandemic-
impacted FY21 as well as volumes from the first two acquired LBCs. In addition to this,
average revenue per install also rose by 3%. There was a positive adjusted operating
profit contribution from the LBCs, and the HomeServe branded business saw further
progression in its turnaround.
Adjusted operating costs marginally declined on the prior year as an increase in volume-
related costs was more than offset by lower amortisation following the full impairment
of the eServe CRM system in FY21. Along with a profitable in-year contribution from CET,
this drove a marginally higher adjusted operating profit than the prior year.
Operational performance
The UK business made good progress in the early stages of the transformation plan
set out in May 2021. The plan has four key element: deepening and digitising existing
relationships with water utilities, establishing strong relationships with energy utilities to
accelerate new customer acquisition, broadening the business into the complementary
offerings of HVAC and Claims Assistance and, lastly, transforming operations and
customer experience through technology.
EMEA MEMBERSHIP & HVAC
In EMEA Membership & HVAC,
we are building multiple new
opportunities and managing a
productive transformation of
our UK business.
UK
Customers
1.5m -8%
FY22
FY21
1.5m
1.6m
Policies
4.0m -9%
FY22
FY21
4.0m
4.4m
Income per customer
£141 -2%
FY22
FY21
£141
£144
Affinity partner households
24m -7%
FY22
FY21
24m
26m
Retention rate
79% +1ppt
79%
78%
FY22
FY21
Strategic report
HomeServe plc Annual Report & Accounts 2022
44
retention rate increasing to 79%, the first
increase in seven years. The customer
book finished the year at 1.5m (FY21: 1.6m).
The business continued to further embed
service delivery improvements. More
than 25% of claims notification calls are
now automated through either digital
or intelligent voice solutions, and the
integrated claims and field management
solution was extended to cover all
contractor activity as the year closed.
Following the year end, the business
successfully migrated the last batch of
policies back to its Ensura system from
eServe. This gives stability for CRM
activities and simplifies the operation of
the business.
Consistent with the strategic direction
of the EMEA division, the October 2021
acquisition of CET Structures Ltd (“CET”)
significantly grew the business’s share in
the UK Claims Assistance market, with
CET providing Claims Assistance for one
in eight UK households. CET continued
to deliver high service levels in home
emergency jobs on behalf of its roster of
blue-chip UK home insurance brands.
In HVAC, the business acquired its third
LBC as part of its buy and build initiative,
further strengthening its coverage of the
north-west of England. A strong pipeline
is in place to extend the LBC network
to other UK regions. In the existing
HomeServe branded business, installation
volumes continued to recover well from
the pandemic impact seen in FY21,
growing by 16%.
In Membership, the solid foundation
of relationships with water utilities was
further strengthened during the year
as partnerships with utilities covering
5m households were renewed, for an
average of five-year terms. Since the year
end, partnerships with utilities covering
a further 6.5m households have been
renewed, meaning that over 75% of water
utility relationships by households have
now been secured until at least 2026.
Relationships were also deepened during
the year, with sales introductions from
partners’ own call centres now live across
all water partners.
The business continues to see the energy
channel as a source of medium-term
growth. Pressure on the wholesale
energy market continues to mean
consumer switching and propensity to
take additional services is at lower levels
than seen historically, but the business is
well placed to scale up its initiatives as and
when market conditions stabilise.
The net 2m reduction in affinity partner
households reflects the ending of the
Thames Water relationship (on 1 April
2021), partially offset by the signing
of Shell Energy (in May 2021) as well
as growth in both E.On and Shell’s
household coverage during H2.
The business continued to deliver high
service quality to policyholders, despite
additional complexity posed for field
management during the second half due
to the Omicron Covid-19 variant. With
higher levels of homeworking now being
established as a permanent feature of
the post-pandemic landscape, claims
frequencies stabilised, albeit at a slightly
higher level than the pre-pandemic
period. This has served to reinforce
product value perception – with the policy
Operating review continued – EMEA Membership & HVAC continued
France
Customers
1.2m +4%
FY22
FY21
1.2m
1.2m
Policies
2.7m +12%
FY22
FY21
2.7m
2.4m
Income per customer
€114 +5%
FY22
FY21
€114
€109
Affinity partner households
19m —
FY22
FY21
19m
19m
Retention rate
87% -1ppt
87%
88%
FY22
FY21
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
45
is typically lower. Policy retention in
France nonetheless remains amongst the
strongest in the Group.
The business saw further progress
optimising its “on demand to policy”
sales channel, which seeks to convert
ad hoc repair job bookings lodged by
non-policyholders into policy sales either
preceding or following a successful repair.
A 20% conversion rate (from booked job to
policy) was achieved during the year, and
attention will now turn to driving up the
number of initial enquiries generated by
affinity partners.
Claims and network management was
successfully migrated to Salesforce
during the second half and, along
with previous migrations of CRM and
customer complaints, means the business
now operates with a single view of the
customer from a flexible, cloud-based
platform.
The business serviced claims and
heating maintenance on behalf of its first
customers in Belgium during the year,
with the second half also seeing a second
direct mail campaign with electric utility
partner, Eneco. HomeServe’s presence in
Belgium was further strengthened through
the acquisition of its first HVAC LBC in
the territory during the second half, with
a strong pipeline of further opportunities
now also in place.
Across the Group, the HVAC business in
France has the highest existing exposure
to the installation of new heating
equipment and technology, including heat
pumps, and further developed its offer
for consumers seeking to decarbonise
their home heating during the year. 60%
of HVAC installations was of low carbon
equipment, with the typically higher price
point of this equipment contributing to
growth in the overall average revenue
per installation. A further seven LBCs
were acquired during the year in France,
with two businesses purchased in the
second half adding to the five acquisitions
completed during the first half.
Our French HVAC businesses are leading the way in the
promotion of alternative sources of heating and cooling, with
60% of installations in the period being a low-carbon unit.
€million
2022
2021
Change
Revenue
Net policy income
136.9
126.6
8%
Repair income
0.3
0.3
(19%)
Membership
137.2
126.9
8%
HVAC installations
36.2
17.9
103%
Other
6.5
3.7
77%
Total revenue
179.9
148.5
21%
Adjusted operating costs
(136.9)
(108.7)
26%
Adjusted operating profit
43.0
39.8
8%
Adjusted operating margin
24%
27%
-3ppts
£million
2022
2021
Change
Revenue
Net policy income
116.2
113.0
3%
Repair income
0.2
0.3
(23%)
Membership
116.4
113.3
3%
HVAC installations
30.7
16.0
92%
Other
5.6
3.3
68%
Total revenue
152.7
132.6
15%
Adjusted operating costs
(116.3)
(97.0)
20%
Adjusted operating profit
36.4
35.6
2%
Adjusted operating margin
24%
27%
-3ppts
Financial performance
Net policy income rose by 8% to €136.9m as solid customer growth was combined with
favourable pricing at renewal.
HVAC installation revenue again grew very strongly, more than doubling to €36.2m.
Installation volumes rose by 77%, largely reflecting the annualisation of ten FY21
acquisitions, though there was also continued organic momentum in activity from LBCs
owned throughout FY21. Average revenue per install also saw an 11% year-on-year
increase, partly reflecting the greater exposure to higher ticket low carbon units.
Adjusted operating costs rose by 26%, ahead of revenue growth, as the business invested
in key partnerships with water utilities and saw higher direct costs in HVAC from the
annualisation of prior year acquisitions. The adjusted operating margin of 24% remains
the highest of the Group’s established Membership businesses.
Operational performance
In France, the business continued to pursue growth opportunities in Membership and
build out its HVAC offering, whilst delivering continued revenue and profit progression.
In Membership, despite a second half impact from the Omicron Covid-19 variant on
staffing levels in water utility partner call centres, gross new customers grew by 12% on
the prior year – and were a record for the French business for the third consecutive year,
with total customer growth of 4%. Digital sales through the base of non-utility partners,
such as home moving aggregators and price comparison websites, were particularly
strong – increasing 28% on the prior year.
The business delivered high levels of service to its policyholders, with a newly tracked
customer satisfaction five-star rating measure producing a result of 4.56 for the year. In
addition, the business was recognised for the sixth consecutive year with the Elu Service
Client de l’annee accolade. The slight decline in retention reflects the strengthening
performance in recent years of new customer joins, with a resultant mix impact on
the overall retention rate of a higher proportion of year 1 policies – on which retention
Strategic report
HomeServe plc Annual Report & Accounts 2022
46
In our Spanish business, adjusted operating profit growth of
24% to €24.6m (FY21: €19.8m) was driven by good progress in
Claims Assistance in Spain and Portugal, and in HVAC, where
our Iberian businesses are policy rich and therefore have
attractive recurring revenue characteristics.
€million
2022
2021
Change
Revenue
Net policy income
51.5
54.8
(6%)
Repair income
170.7
146.8
16%
HVAC installations
9.0
7.7
16%
Other
13.0
9.7
34%
Total revenue
244.2
219.0
11%
Adjusted operating costs
(219.6)
(199.2)
10%
Adjusted operating profit
24.6
19.8
24%
Adjusted operating margin
10%
9%
+1ppt
£million
2022
2021
Change
Revenue
Net policy income
43.8
48.9
(10%)
Repair income
145.1
131.2
11%
HVAC installations
7.6
6.9
11%
Other
11.0
8.7
27%
Total revenue
207.5
195.7
6%
Adjusted operating costs
(186.7)
(178.0)
5%
Adjusted operating profit
20.8
17.7
18%
Adjusted operating margin
10%
9%
+1ppt
Financial performance
Net policy income decreased by 6%, with the impact of the run-off of the
Endesa policy book partly offset by continued good growth in the stock of HVAC
maintenance policies.
Repair income rose by 16% over the year, with good traction in both existing and new
businesses. The HomeServe branded Claims Assistance business which operates
in Spain saw a 7% rise in job volumes, with growth both from the bancassurer
customer base as well as other partners such as energy utilities. There was an uplift in
revenue contribution from Mesos year-on-year of c.€11m, reflecting a full 12 month
contribution in the current year (versus just seven months in the prior year), with part
of this increase drawing from its activity in Portugal. Additionally, Servitis, a Portuguese
Claims Assistance business acquired during the first half, made a good top-line
contribution.
HVAC installations revenue also rose by 16%. 11% growth in installation volumes
was mostly organic, being in respect of those businesses owned throughout FY21,
and there was also good progression in average revenue per install. Other revenue
largely comprises non-installation jobs completed by the HVAC LBCs, with growth
predominantly driven by annualising FY21 acquisitions as well as in-year contribution
from FY22 acquisitions.
Adjusted operating costs rose by 10%, slightly behind revenue growth, mostly
reflecting operating leverage in the HomeServe branded Claims Assistance business
as well as a full 12-month contribution from the FY21 acquisition of Mesos.
Operating review continued – EMEA Membership & HVAC continued
Spain
Customers
0.8m -5%
FY22
FY21
0.8m
0.9m
Policies
1.0m -6%
FY22
FY21
1.0m
1.1m
Income per customer
€57 -5%
FY22
FY21
€57
€60
Retention rate
80% -3ppts
80%
83%
FY22
FY21
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
47
Operational performance
The Spanish business saw significant
operational and strategic progress in
FY22, with its deep expertise in Claims
Assistance seeing it develop a new service
proposition that brings the potential of
returning to Membership customer growth
in the medium-term, alongside further
developing its HVAC business.
The existing Claims Assistance business,
which completes emergency jobs for
homeowners on behalf of a largely
bancassurer customer base, saw good
volume growth during a year where
homeowner behaviour was less influenced
by pandemic restrictions. There were also
strong activity levels from Mesos during its
first full year under HomeServe ownership.
The ‘service customer’ model, in which
key Claims Assistance competencies
(including marketing, campaign
execution and network management) are
deployed for partners who continue to
maintain ownership rights over the end
homeowner, signed its first customers
during the year from an agreement with a
Portuguese energy retailer. A partnership
was also struck with a large Spanish insurer
under this new model, with a strong
pipeline of further opportunities in place.
The Spanish HVAC business remains
weighted towards maintenance (rather
than installation) activity, with policies
across the portfolio driving a good
recurring revenue stream. Buy and build
activity continued in FY22, capped by the
acquisition of Grupo MH in the fourth
quarter – a transformational deal which
grows the policy count by 45% and
enables further scale to be built in north-
east Spain. Four LBCs were acquired in
total during the year.
New Markets
In its third full financial year, HomeServe Japan saw further
traction as it continues to invest to realise the significant market
opportunity.
The New Markets division comprises the Group’s initiatives to expand the Membership
offering into new territories, and currently consists mainly of HomeServe’s joint venture
with Mitsubishi Corporation in Japan.
£million
2022
2021
Change
Adjusted operating loss
(5.6)
(6.3)
(11%)
Financial performance
The lower adjusted operating loss in New Markets reflects prospecting activity for new
Membership territories that are not adjacent to established businesses having ceased at
the end of FY21.
In its third full financial year, HomeServe
Japan saw further traction as it continues
to invest to realise the significant market
opportunity.
Business development activity sustained
its recent momentum, and a further two
electricity utilities were signed during the
year to give HomeServe Japan access to
14m households in total.
Provision of water in Japan has historically
been on a municipalised basis, with all
homes supplied by a municipal provider,
of which there are in excess of 1,500. The
business achieved its first municipal water
partner signing during the second half,
giving confidence to take the offering to
other municipal providers.
Policy retention rates remained extremely
strong at 91%, as total customers in Japan
more than doubled to 41,000 (FY21:
17,000).
Other New Markets
During the second half HomeServe
completed its first acquisition of an
HVAC LBC in Germany. This establishes a
presence in a large market with an attractive
business that firmly fulfils the HVAC
investment criteria set out in November
2021, as well as having strong expertise in
the installation of low carbon units.
Japan
Affinity partner households
14m +94%
FY22
FY21
14m
7m
Retention rate
91% -2ppts
91%
93%
FY22
FY21
Strategic report
HomeServe plc Annual Report & Accounts 2022
48
Operating review continued – Home Experts
Home Experts comprises the Group’s online platform businesses, being Checkatrade in
the UK, eLocal in North America and the Group’s other interests in online platforms to
match consumers with tradespeople – notably Habitissimo in Continental Europe.
£million
2022
2021
Change
Revenue
Checkatrade
55.6
38.9
43%
eLocal
88.9
91.3
(3%)
Other Home Experts
10.7
9.6
11%
Total revenue
155.2
139.8
11%
Adjusted operating costs
(150.9)
(150.0)
1%
Adjusted operating profit/(loss)
4.3
(10.2)
n/a
Continued to strengthen its position as the UK’s leading
online platform for matching homeowners with quality
trades.
£million
2022
2021
Change
Total revenue
55.6
38.9
43%
Adjusted operating costs
(58.4)
(54.9)
6%
Adjusted operating loss
(2.8)
(16.0)
(83%)
Financial performance
Total revenue growth of 43% was driven by an uplift in both average revenue per
trade (“ARPT”) and the number of paying trades.
Adjusted operating costs grew by 6%, substantially below revenue growth, as brand
strength and other initiatives enabled the business to do more efficient consumer
marketing. Checkatrade remains firmly on track to reach profitability in FY23.
Operational performance
Checkatrade made good progress during FY22, as it continues to strengthen its
position as the number one destination in the UK for homeowners to get their jobs
done by quality, vetted tradespeople.
Sustained high consumer demand for home improvements in the UK meant a more
challenging environment to promote the benefits of Checkatrade membership to
extremely busy trades. However the business developed its core product to remain
relevant to all trades irrespective of the state of their order books. “Lite”, Standard
and “Pro” packages (“LSP”), which enable trades to tailor their spend to the amount
of work they desire, launched towards the end of the first half with a flexible LSP
offer (meaning trades can shift up and down the tiers) becoming the lead acquisition
product during the second half. Alongside market-wide search trends which pointed
to a slight easing in consumer demand during the second half, LSP helped to
stimulate 7% growth in paying trades for the year.
The business also delivered more value to its trades. Additional trade categories
and postcodes enable trades eager for more work to boost their lead flow, with
these cross-sell initiatives aided by sales agents’ use of a newly developed postcode
analytics tool. Slightly more than half of the 31% increase in average revenue per
trade (“ARPT”) was driven by cross-sell and pricing initiatives, along with an in-year
benefit from the growing roster of national accounts. The balance of the increase
was due to the non-repeat of discounts given to trades in FY21 at the onset of the
pandemic. Taken together, these factors drove ARPT to exceed the £1,200 target set
out at the June 2019 investor day.
HOME EXPERTS
As expected, Home Experts
achieved the key milestone
of divisional profitability this
financial year, generating
£4.3m of adjusted operating
profit (FY21: £(10.2)m).
Paying trades
47k +7%
FY22
FY21
47k
44k
Average revenue per trade
£1,229 +31%
FY22
FY21
£1,229
£939
Contacts
10.3m +26%
FY22
FY21
10.3m
8.1m
Web visits
35.7m +23%
FY22
FY21
35.7m
29.0m
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
49
For consumers, Checkatrade continues
to be the number one destination to
find a quality trade online. With 18% of
all consumers who used a tradesperson
in the 12 months ending February 2022
having done so via Checkatrade, the
platform maintained a significant lead over
the no.2 player (at 6%).
The Checkatrade Guarantee, which covers
a job booked through the platform for
up to 12 months to the value of £1,000,
launched towards the end of the first
half and has resonated strongly with
consumers. Consumers covered by the
Guarantee are more likely to recommend
a Checkatrade trade, a good lead indicator
as the business seeks to build a necessity
for trades to be on the platform as a
fundamental badge of quality.
Following its initial launch towards
the end of the first half, the number
of homeowners registered on the
Checkatrade consumer portal increased
materially to 0.5m over the course of the
fourth quarter. Alongside the strength
of the Checkatrade brand, and relevant
consumer content such as price guides,
this will aid the business in generating
consumer demand in an increasingly
efficient manner.
eLocal’s sophisticated pay-for-performance model delivered
good momentum in monetisation.
$million
2022
2021
Change
Total revenue
121.6
119.1
2%
Adjusted operating costs
(107.1)
(102.0)
5%
Adjusted operating profit
14.5
17.1
(15%)
Adjusted operating margin
12%
14%
-2ppts
£million
2022
2021
Change
Total revenue
88.9
91.3
(3%)
Adjusted operating costs
(78.3)
(78.1)
0%
Adjusted operating profit
10.6
13.2
(20%)
Adjusted operating margin
12%
14%
-2ppts
Financial performance
Total revenue grew by 2% to $121.6m, as a slight fall in monetised calls was more than
offset by higher revenue per call.
The adjusted operating margin declined by 2 percentage points, driven by a higher mix of
revenue in lower margin verticals than seen in the prior year.
Operational performance
At eLocal, consumer demand – as tracked through the volume of monetised calls –
declined in the second half against very high prior year levels. During the second half of
the prior year, a number of eLocal’s categories saw record levels of demand either driven
by, or simultaneous with, the lifting of Covid-19 protective measures, tailwinds which
normalised by the second half of FY22. This was particularly evident in the legal vertical,
with a number of mass litigations coming to an end during the first half. Notwithstanding
this, eLocal’s sophisticated pay-for-performance model delivered good momentum in
monetisation, with revenue per monetised call growing by 5%.
eLocal’s lead generation model effectively manages the risk of search engine algorithm
changes by working with a number of affiliates, each performing its own search engine
management (“SEM”) activities, ensuring eLocal’s lead sourcing is well-diversified. During
the year, eLocal entered into a strategic agreement with a key affiliate, which will give the
business direct control of a larger proportion of the leads it sources through SEM.
1 FY20 comparative for monetised calls represents full 12 months.
Monetised calls
3.4m -3%
FY22
FY21
3.4m
3.6m
Strategic report
HomeServe plc Annual Report & Accounts 2022
50
Operating review continued – Home Experts continued
Financial performance
The adjusted operating loss narrowed significantly during the year, largely
reflecting focusing resource on the continental European markets as well as other
organisational efficiencies.
Operational performance
At Habitissimo the fall in paying trades reflected the full implementation of the
Directory Extra model in its largest market of Spain, as well as the strategic decision
to focus on the core European markets of Spain, Italy and Portugal. This also saw
Habitissimo dispose of its operations in Brazil during the first half. Refining its
geographic focus will give Habitissimo a stronger platform as it seeks to implement
strategic initiatives that have worked well in other Home Experts businesses, such
as cultivating national accounts and driving monetisation through a balance of both
subscription and “pay for performance”.
Lower web visits and contacts were driven by resource being focused in trade
categories and geographies in which Habitissimo is able to offer good coverage.
Alongside the greater appeal to consumers of a ‘directory plus’ user experience, this
more focussed model contributed to a sustained improvement in consumer net
promoter score (“NPS”) versus the prior year.
The marked increase in average revenue per trade was also driven by the strategic
focus on the core European markets – where Habitissimo has historically seen higher
levels of monetisation.
Paying trades
11k -46%
FY22
FY21
11k
20k
Contacts
1.1m -45%
FY22
FY21
1.1m
2.0m
Average revenue per trade
€831 +63%
FY22
FY21
€831
€511
Web visits
42m -53%
FY22
FY21
42m
89m
Other Home Experts
£million
2022
2021
Change
Total revenue
10.7
9.6
11%
Adjusted operating costs
(14.2)
(17.0)
(17%)
Adjusted operating loss
(3.5)
(7.4)
(53%)
HomeServe’s other Home Experts businesses mainly comprises Habitissimo, the
market leader in Spain and Italy, as well as modest interests in other businesses.
The financial metrics set out below are on a combined basis, whilst the operational
metrics are those of Habitissimo only.
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
51
What’s the biggest benefit of
being on Checkatrade?
“For me personally, I cannot recommend Checkatrade enough. We get hundreds of
enquiries a month, we make full use of the directories, which get sent out periodically,
and we even opt for the sponsored listings within these. They bring us a lot of
additional work, alongside the listing on the website.
The biggest benefit of being on Checkatrade for us is that we do not need a sales
team. Checkatrade alone brings us enough work in to employ me and 13 staff with
5 vehicles."
www.checkatrade.com/blog/trade/lee-story-with-checkatrade
HOME EXPERTS
Strategic report
HomeServe plc Annual Report & Accounts 2022
51
Governance
Financial statements
Other information
Strategic report
HomeServe plc Annual Report & Accounts 2022
52
“It was great to see
10% growth in Group
revenue, to over £1.4bn,
and continued delivery
of improved operating
leverage driving a 15%
increase in both of
our key adjusted profit
measures.”
Financial review
David Bower
These financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the United Kingdom.
Group statutory results
The headline statutory financial results for the Group are presented below.
£million
2022
2021
Total revenue
1,429.3
1,304.7
Operating profit
202.6
71.8
Net finance costs
(27.5)
(24.6)
Adjusted profit before tax
220.3
191.3
Amortisation of acquisition intangibles
(44.9)
(45.0)
Certain transaction related costs
(0.3)
(6.7)
Exceptional items
—
(92.4)
Statutory profit before tax
175.1
47.2
Tax
(41.7)
(15.4)
Profit for the year
133.4
31.8
Attributable to:
Equity holders of the parent
132.8
31.1
Non-controlling interests
0.6
0.7
133.4
31.8
Profit before tax
Adjusted profit before tax increased by 15% to £220.3m, with further strong growth in
North American Membership & HVAC, stable growth in EMEA Membership & HVAC and a
first-time adjusted operating profit in the Home Experts division.
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
£175.1m, with good underlying growth as well as the absence of any exceptional charges
as seen in the prior year.
Net finance costs
Net finance costs increased to £27.5m (FY21: £24.6m) due to the higher average net debt
balance year-on-year.
Amortisation of acquisition
intangibles
Acquisition amortisation relates to
customer and other contracts held
by third-party businesses which were
acquired by HomeServe as part of
business combinations and asset
purchases.
The amortisation of acquisition
intangibles of £44.9m (FY21: £45.0m)
was broadly in line with the prior year.
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
£0.3m (FY21: £6.7m) were incurred, with
the unwinding of interest on contingent
consideration in relation to previous
M&A partially offset by a reduction in
the fair value of option obligations and
contingent consideration.
A reconciliation between adjusted
and statutory amounts is included
within the Glossary at the end of this
announcement along with further
commentary on HomeServe’s use
of adjusted items as an Alternative
Performance Measure.
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
53
Strategic report
Tax strategy
The Group has continued to operate within
the tax strategy approved by the Board in
May 2021. 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 £41.7m (FY21: £15.4m). The pre-
exceptional effective tax rate for the year
ended 31 March 2022 was 24% (FY21: 24%).
The post-exceptional effective tax rate for
the same period was 24% (FY21: 33%).
UK corporation tax is calculated at 19%
(FY21: 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 was substantively enacted on 24
May 2021 when the UK’s deferred taxes
were re-measured accordingly. However,
based on the UK’s deferred tax position, this
UK tax rate increase did 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 a £3.7m re-measurement gain on
defined benefit pension schemes and a £7.4m foreign exchange gain on translation.
Cash flow and financing
HomeServe’s business model continues to be highly cash generative with free cash flow
in FY22 of £131.0m (FY21: £135.0m).
£million
2022
2021
Adjusted operating profit
246.5
214.3
Exceptional items
—
(92.4)
Amortisation of acquisition intangibles
(44.9)
(45.0)
Certain transaction related income/(costs)
1.0
(5.1)
Operating profit
202.6
71.8
Impact of exceptional items
—
92.2
Impact of certain transaction related (income)/costs
(1.0)
5.1
Depreciation and amortisation
114.1
123.5
Other non-cash items
(2.0)
10.2
Increase in working capital
(41.2)
(25.1)
Cash generated by operations
272.5
277.7
Net interest and associated borrowing costs
(24.5)
(21.7)
Repayment of lease principal
(14.7)
(14.8)
Taxation
(40.6)
(35.1)
Capital expenditure - ordinary
(68.2)
(71.4)
Capital expenditure - acquisitions of policy books
(2.3)
—
Proceeds on disposal of fixed assets
8.8
0.3
Free cash flow
131.0
135.0
Business acquisitions
(130.8)
(77.3)
Business disposals
3.0
(3.9)
Acquisition of non-controlling interest
(18.2)
—
Contribution to equity accounted investee
(3.6)
(2.2)
Loan to investee
(1.3)
—
Equity dividends paid
(89.3)
(80.5)
Net movement in cash and bank borrowings
(109.2)
(28.9)
Impact of foreign exchange and other non-cash items
(20.3)
14.8
Movement in IFRS 16 lease liabilities
0.4
9.4
Opening net debt
(513.7)
(509.0)
Closing net debt
(642.8)
(513.7)
Strategic report
HomeServe plc Annual Report & Accounts 2022
54
Dividends
In light of the offer for the Group, the
Board is not recommending payment
of a final dividend. However, if the
offer terminates, the Board will look
to declare an interim dividend in
accordance with the Company’s Articles
of Association.
Financing
In FY22 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
£315.7m and net debt of £642.8m,
including c.£52m of lease liabilities at 31
March 2022, the Group was at the upper
end of its target range at 2.0x. 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 £30m via the US private
placement market. The proceeds were
used to increase headroom on the
revolving credit facility (RCF).
As at year end, HomeServe had drawn
gross debt of £766m against its gross
debt facilities of £1,084m, which
combined with a cash balance of £175m
gives a total headroom of £493m. With
this headroom, and with only £110m
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 £24.5m (FY21: £21.7m)
principally due to the higher average net
debt figure year-on-year.
Working capital
Working capital absorption was £41.2m in FY22 (FY21: £25.1m), c.3% of revenue and in
line with guidance. This principally reflects the normal seasonal profile of particularly the
Membership business, with a second-half weighting in policy sales continuing to be seen.
Capital expenditure
Total capital expenditure, comprising ordinary capital expenditure, policy book
acquisitions and fixed asset disposal proceeds, was £61.7m (FY21: £71.1m). Ordinary
capital expenditure included £11.3m (FY21: £12.8m) of payments made to partners who
undertake marketing activity to acquire customers on HomeServe’s behalf. The balance
of £56.9m (FY21: £58.6m) was slightly lower than the prior year, reflecting the conclusion
of key transformation programmes, particularly in North America and the UK. The
business acquired a small policy book in North America for £2.3m (FY21: nil). Partially
offsetting ordinary capital expenditure and the policy book acquisition, were proceeds of
£8.8m (FY21: £0.3m) which predominantly relate to the disposal of the first tranche of the
Piedmont policy book in North America. These proceeds have been fully reinvested into
organic marketing activity.
Acquisitions
M&A activity continued to support HomeServe’s growth ambitions, incurring a cash
outflow in the year of £130.8m (FY21: £77.3m). There were three material acquisitions in
the year, giving rise to a £77.7m net cash outflow;
• CET Structures Ltd (“CET”), broadening the UK business’s capabilities into Claims
Assistance
• McLoughlin Plumbing & Heating Co., (“McLoughlin”), enhancing the scale and scope
of HomeServe’s HVAC capabilities in North America
• Grupo MH, enhancing the scale and scope of HomeServe’s HVAC capabilities in Spain
An additional 20 businesses were acquired for a net cash outflow of £34.7m;
• The HVAC buy and build strategy continued across North America, France, Spain and
the UK, with an HVAC presence also being established in Belgium and Germany
• Home Experts completed an acquisition in the UK to incorporate specialist point of
sale finance expertise
• A Claims Assistance acquisition in Portugal built further scale in that market.
The total cash outflow on acquisitions of £130.8m consisted of £112.4m net cash
outflow in the year, as well as £18.4m (FY21: £3.6m) paid on deferred and contingent
consideration relating to business combinations in prior periods.
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.
Other
In addition to the above, during the year the Group increased its interest in eLocal to
c. 90% (previously 79%) of the issued share capital for cash consideration of $25.1m
(£18.2m).
Earnings per share
Basic earnings per share for the year increased by 327% to 39.5p from 9.3p, reflecting
the strong underlying trading performance combined with the absence of a large
exceptional charge. On an adjusted basis, earnings per share increased 15% from 42.7p
to 49.3p. The weighted average number of shares increased from 335.8m to 336.3m,
principally due to new shares issued in fulfilment of share schemes that vested in the year.
Financial review
continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
55
Foreign exchange impact
The impact of changes in the Euro and US dollar exchange rates between FY21 and FY22 resulted in a £47.6m decrease in the reported
revenue and a £6.2m 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.
Effect on (£m)
Average exchange rate
Revenue
Adj. operating
profit
2022
2021
Change
2022
2022
North America 1
$
1.36
1.31
4%
(24.1)
(2.3)
France
€
1.18
1.12
5%
(8.0)
(2.2)
Spain
€
1.18
1.12
5%
(10.4)
(1.3)
eLocal
$
1.37
1.31
4%
(4.7)
(0.5)
Habitissimo
€
1.17
1.12
5%
(0.4)
0.1
Total International
(47.6)
(6.2)
1 North America comprises US dollar denominated earnings from Membership & HVAC – North America.
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 FY22 average USD rate of c.1.36 and the Euro rate
of c.1.18 would have had approximately a £9.5m and £4.9m impact respectively on full year adjusted operating profit.
With respect to HomeServe’s joint venture in Japan and early stage operations in Germany, the impact of future movements in the Yen
and Euro pertaining to these activities respectively is not currently material.
Customers
HomeServe’s Membership businesses provide products to homeowners by successfully marketing to end consumers, converting them
to customers and then delivering high standards of service.
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 report provides
further detail on customer definitions and the associated affect this has on revenue recognition.
Strategic report
HomeServe plc Annual Report & Accounts 2022
56
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 124.
The following table identifies where, in the
Annual Report, information on the issues,
factors and stakeholders the Board has
considered in respect of Section 172(1) can
be found.
Section 172(1) statement
Duty to promote the success of the Company
The board has had regard to the following
matters:
More information
Long-term results – the likely
consequences of any decision in the
long-term
Example: Decisions taken during the year
are made in the context of the long-term
strategy and with regard to the Group’s
capital allocation model. Shorter-term
expectations in respect of the strategy
are approved as part of the budget
process, against which performance is
then monitored. As part of the review
of the Remuneration policy and, having
listened to shareholder feedback, the
Remuneration Committee agreed that
ROIC should be added as a performance
condition in respect of LTIP awards being
made in FY23.
Strategic report
Chairman’s statement
Chief Executive’s review
Market overview
Business model and strategy
Key performance indicators
Principal risks and
uncertainties
Viability statement
Governance
Board leadership and
company purpose
Directors’ remuneration
report
4
6
10
12
18
32
58
66
92
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. The Covid-19 pandemic
has brought challenges including in
respect of resourcing, retention and
engagement. The Board has encouraged
all of our businesses to ensure that new
hybrid working arrangements were
implemented to support a flexible and
engaged workforce for the long-term.
Regular updates on hybrid working
arrangements were provided to the
People Committee.
Strategic report
Business model and strategy
Responsible business
Governance
Board leadership and
company purpose
Nomination Committee
report
People Committee report
12
20
66
80
82
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. The COVID pandemic
demonstrated that increased flexibility is
needed, and this was taken into account
when developing products and services
both for our Membership customers
and our Trades. In the US for example,
we worked with our partners to develop
Heat as a Service and in Checkatrade,
more flexible membership options were
launched for Trades.
Strategic report
Market overview
Business model and strategy
Responsible business
Governance
Board leadership and
company purpose
10
12
20
66
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
57
The board has had regard to the following matters:
More information
The community and our environment – the impact of the Group’s operations on the
community and the environment
Example: The Group seeks to have a positive impact on the communities in which
it operates and reduce its impact on the environment. We continued to support
communities local to our business operations and the HomeServe Foundation has made
real progress in its efforts to increase the number of apprentices in the UK. In terms of
the environment, we set our first Scope 3 carbon footprint target and undertook a review
of climate related risks and opportunities. The Board agreed that the remit of the People
Committee be extended to cover wider ESG matters.
Strategic report
Responsible business
20
Our reputation – our desire to maintain our reputation for high standards of business
conduct
Example: During the year, we launched a new Risk & Compliance portal to ensure that
people can easily access the policies and processes we expect them to adhere to.
Strategic report
Chairman’s statement
Chief Executive’s review
Responsible business
4
6
20
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 year, the approach from Brookfield meant that this was at the
heart of many Board discussions.
Strategic report
Chairman’s statement
Responsible business
Governance
Chairman’s overview
Board leadership and
company purpose
Directors’ report
4
20
62
66
121
Strategic report
HomeServe plc Annual Report & Accounts 2022
58
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 2025. 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 2022 were initially reviewed by the
Executive Committee in February 2022
and subsequently approved by the Board
in March 2022.
Through FY22, North American
Membership & HVAC saw further strong
growth in revenue and profit, EMEA
Membership and HVAC delivered stable
profit growth and the Home Experts
division saw a first-time profitable result for
the year.
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, which now includes a
specific risk related to climate change, 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 33 of the annual report) which
addresses its risk appetite and risk policy
and continues to review both emerging
risks and opportunities.
All major risks are scored based on their
potential impact and likelihood and are
reviewed regularly by the Audit & Risk
Committee.
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 policy retention
• a strong financial position with over
£490m of headroom in its debt
facilities at 31 March 2022
• historic and ongoing compliance
with all banking covenants
• an increasing contribution from
non-Membership revenue lines,
with Home Experts and HVAC
installations each growing 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 116m
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 8.4m 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 2025.
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.
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
three business divisions, 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
Viability statement
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
59
HomeServe plc Annual Report & Accounts 2022
59
Strategic report
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 the
period commencing 1 April 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
note that though the future impact of
Covid-19 is evolving, treatment of its effect
has largely moved from pandemic to
endemic across the Group’s territories. The
continued resilience which the business
has demonstrated means, in the Directors’
assessment, it has been integrated into
the normal operating environment on
the basis of which the Directors have
considered the going concern status of
the Group.
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
24 May 2022
Going concern
Governance
Financial statements
Other information
Strategic report
HomeServe plc Annual Report & Accounts 2022
60
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
Requirement
Our policies
Our policies
Where you can find out more
Where you can find out more
Anti-bribery and
Anti-bribery and
anti-corruption
anti-corruption
Financial Crimes and Sanctions
Financial Crimes and Sanctions
Whistleblowing
Whistleblowing
See page 20 Responsible business.
See page 20 Responsible business.
Employees
Employees
Code of Business Conduct
Code of Business Conduct
See page 20 Responsible business.
See page 20 Responsible business.
Environment
Environment
Group Environmental Policy
Group Environmental Policy
See page 20 Responsible business.
See page 20 Responsible business.
Human rights
Human rights
HomeServe does not currently have a human rights
HomeServe does not currently have a human rights
policy but all businesses are expected to comply with
policy but all businesses are expected to comply with
key policies regarding e.g. employment rights and
key policies regarding e.g. employment rights and
equal opportunities.
equal opportunities.
See page 20 Responsible business.
See page 20 Responsible business.
Social activities
Social activities
Responsible Business Policy
Responsible Business Policy
See page 20 Responsible business.
See page 20 Responsible business.
Description of the principal
Description of the principal
risks and impact of
risks and impact of
business activity
business activity
n/a
n/a
See page 32 Principal risks and uncertainties.
See page 32 Principal risks and uncertainties.
Description of the business
Description of the business
model
model
n/a
n/a
See page 12 Business model and strategy.
See page 12 Business model and strategy.
Non-financial Key
Non-financial Key
performance indicators
performance indicators
n/a
n/a
See page 18 Key performance indicators.
See page 18 Key performance indicators.
Strategic report 2022
for and on behalf of the Board
Richard Harpin
Founder and Chief Executive
24 May 2022
Non-financial information statement
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
61
Strategic report
Contents
Governance
62 Corporate governance
statement
62 Chairman’s overview
63 Compliance and other
statements
66 Board leadership and company
purpose
69 Division of responsibilities
74 Composition, succession and
evaluation
74 Our Board
76 Our Executive team
80 Nomination Committee report
82 People Committee report
86 Audit, risk and internal control
86 Audit & Risk Committee report
92 Directors’ remuneration report
92 Annual statement
93 Remuneration at a glance
97 Directors’ remuneration policy
106 Annual report on remuneration
121 Directors’ report
124 Statements of responsibilities
125 Independent Auditor’s report
Governance
Financial statements
Other information
“Every day that I wake up,
before I hit the shower, I
know that I’m going to have
a wonderful day because I’m
doing something that I love,
which is satisfying those
customers out there.”
Jean Charles
Lead Installer, HomeServe USA
Governance
HomeServe plc Annual Report & Accounts 2022
62
Dear Shareholder
I am pleased to present this year’s Corporate governance report which is my first as Chair. It is evident from my interactions to date
that the Board believes that good corporate governance and doing business responsibly underpin our business performance. I have
inherited a Board that understands the need to be accountable to our shareholders and which is fully committed to meeting the
required standards of corporate governance.
I have set out on page 4 a summary of my first impressions of HomeServe. The business is driven by a clear sense of purpose and
more detail on this is also provided on page 4.
This has been a busy year for the Board. Further details on the key focus and the matters discussed during the year are provided on
pages 5 and 66. Considerable time and effort has been spent on the approach from Brookfield and the Board’s response has clearly
demonstrated that it operates proactively and cohesively in times of challenge. The true effectiveness of any Board is tested when
things happen unexpectedly, and it is clear to me that our Board is an effective one.
Future Outlook
On 19 May 2022, it was announced that the Board had reached agreement with Hestia Bidco Limited, an indirect subsidiary of
Brookfield Infrastructure Funds, on a recommended cash offer to acquire the entire issued share capital of HomeServe. The
acquisition is currently expected to complete during the fourth quarter of 2022 via a court-sanctioned scheme of arrangement,
subject to HomeServe shareholder approval and various regulatory clearances.
Tommy Breen
Chairman
24 May 2022
Corporate governance statement
Chairman’s overview
“It is evident from my
interactions to date that
the Board believes good
corporate governance
and doing business
responsibly underpin our
business performance.”
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
63
Compliance with the UK Corporate Governance Code 2018
The Board believes that throughout FY22, the Company has applied the principles and complied with the majority of the relevant
provisions of the UK Corporate Governance Code 2018 (‘the Code’). We did not comply with provisions 9 and 19 for part of the year as
our outgoing Chairman, Barry Gibson had served on the Board since 2004 and had been Chairman since 2010 (he was independent
on appointment). Barry stepped down from the Board on 18 May 2021 and was 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. As previously reported, pension
contributions for the Directors concerned will be reduced to the level of the workforce on 1 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 59.
Governance pages 62 to 124.
Directors’ remuneration report pages 92 to 120.
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.
Strategic report pages 2 to 59.
Board leadership and company purpose pages 66 to 68.
Division of responsibilities pages 69 to 73.
Directors’ remuneration report pages 92 to 120.
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.
Responsible business pages 20 to 31.
Principal risks and uncertainties pages 32 to 39.
Section 172(1) statement page 56.
Audit, risk and internal control pages 84 to 91.
Audit & Risk Committee report pages 86 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 page 56.
Shareholder relations page 68.
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 page 56.
Board leadership and company purpose pages 66 to 68.
Directors’ remuneration report pages 92 to 120.
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.
Division of responsibilities pages 69 to 73.
Compliance and other statements
Governance
HomeServe plc Annual Report & Accounts 2022
64
Division of responsibilities
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.
Division of responsibilities pages 69 to 73.
Board biographies pages 74 to 77.
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.
Board leadership and company purpose pages 66 to 68.
Division of responsibilities pages 69 to 73.
Audit & Risk Committee report pages 86 to 91.
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.
Responsible business pages 20 to 31.
Board leadership and company purpose pages 66 to 68.
Division of responsibilities pages 69 to 73.
Audit, risk and internal control pages 84 to 91.
Audit & Risk Committee report pages 86 to 91.
Directors’ remuneration report pages 92 to 120.
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.
Nomination Committee report pages 80 to 81.
Composition, succession and evaluation pages 74 to 83.
Principle K
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 74 to 77.
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 80 to 81.
Composition, succession and evaluation pages 74 to 83.
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 84 to 91.
Audit & Risk Committee report pages 86 to 91.
Principle N
The board should present a fair, balanced and understandable
assessment of the company’s position and prospects.
Strategic report pages 2 to 59.
Audit, risk and internal control pages 84 to 91.
Audit & Risk Committee report pages 86 to 91.
Financial statements pages 137 to 216.
Corporate governance statement continued
Compliance and other statements continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
65
Audit, risk and internal control
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 39.
Viability statement page 58.
Audit, risk and internal control pages 84 to 91.
Audit & Risk Committee report pages 86 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 59.
Board leadership and company purpose pages 66 to 68.
Directors’ remuneration report pages 92 to 120.
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.
Directors’ remuneration report pages 92 to 120.
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 120.
Viability and going concern
Statements in respect of viability and going concern are set out on pages 58 and 59.
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 page 32. Further details on the
emerging and principal risks and uncertainties can be found on pages 32 to 39 and the viability statement is on page 58.
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 page 84.
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 89.
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 page 56.
Governance
HomeServe plc Annual Report & Accounts 2022
66
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, 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 in each of our businesses and there have been detailed discussions on North America, EMEA and Home Experts.
As well as looking for new opportunities, the Board also takes time to reflect on things that have not gone so well. A case in point was
the difficult decision to halt the implementation of eServe, the UK CRM solution. A thorough internal review was undertaken into the
programme and some useful learnings identified. These learnings were discussed by the Board and also shared with our local Boards
and management teams.
Details of the matters discussed during the year are set out in the table below:
Board activity in FY22
Strategy, operations and finance
• Received regular updates from the Executives on trading
performance
• Approved the annual budget and business plan
• Reviewed and approved the Group’s FY21 and half year FY22 results
(including dividends)
• Approved the FY21 Annual Report (including a fair, balanced and
understandable assessment) and 2021 AGM Notice
• Reviewed the Group’s debt, capital and funding arrangements
• Received updates on business plans and strategic initiatives
including automation and energy efficiency services
• Reviewed the learnings from the aborted investment in
the eServe customer relationship management system
and agreed standards to apply to future programmes
• Received regular updates on M&A activity
• Received updates on the technology strategy including
information security
• 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 and Executive
Directors
• Reviewed the organisation structure
• 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.
• Discussed environmental strategy and approved the
target for our scope 3 carbon footprint
• Received updates on ESG activity in each of the
businesses
• Agreed to expand the remit of the People Committee
of the Board to cover ESG matters; the Committee will
become the ESG & People Committee in FY23.
Internal control and risk management
Governance and legal
• Reviewed the principal risks and uncertainties
• Reviewed and confirmed the Group’s viability statement and going
concern status
• Reviewed and validated the effectiveness of the Group’s systems of
internal controls and risk management
• Considered and approved the Group’s tax strategy.
• Received updates on corporate governance
developments
• Received reports on engagement with investors and
other stakeholders
• Conducted an externally facilitated evaluation of the
Board’s effectiveness and discussed the outcome
• Received regular reports from the Chairman of the
Audit & Risk Committee.
Board leadership and company purpose
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
67
Our purpose, values and culture
Our purpose is to make home repairs and improvements easy and this is underpinned by our values. The approach taken 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 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 is the designated workforce engagement Director and also chairs the People Committee. This activity is covered in the
People Committee report on pages 82 and 83.
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 which 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
• Insights from our customers (including trades)
• 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
Stakeholder groups considered
How the Board or Committee had regard to stakeholders
Decisions
Brookfield
approach
Shareholders,
employees,
customers and
partners
Consideration was given to:
• Whether a change in ownership would deliver
better value for shareholders
• The impact of a change in ownership on our
customers and partners
• The impact of a change in ownership on our
employees.
Decision taken to engage in
discussions with Brookfield to
explore their proposals.
Reviewing
investment in
eServe
Shareholders,
customers,
employees
Consideration was given to:
• the further investment needed
• the quality of service provided to customers and
how any change to the platform could impact
on them
• the impact on employees in terms of workload
and morale
• whether continued investment provided value
for shareholders.
Decision taken to halt investment.
Governance
HomeServe plc Annual Report & Accounts 2022
68
Matter discussed
Stakeholder groups considered
How the Board or Committee had regard to stakeholders
Decisions
Agreeing
Environment
targets
The environment,
shareholders,
employees,
government
Consideration was given to:
• the impact of our operations on the environment
• government regulations and targets
• our reputation from a shareholder and employee
perspective.
A target in respect of our Scope 3
carbon footprint was set.
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
division, has also attended a number of meetings.
During the year, there was a comprehensive programme of virtual and in person 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 new Chairman and ten 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 2021 AGM with no significant 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 policy is available on our
website: www.homeserveplc.com/who-we-are/governance/policies/
During the year, a whistleblowing framework was introduced to ensure that the processes underpinning the policy are
implemented consistently across the Group. This included establishing minimum standards in respect of communication and
training.
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.
Board leadership and company purpose
continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
69
The Chairman of the Board is responsible for the effectiveness of the Board. Barry Gibson served as Chairman until 18 May 2021 and was
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/#content
Key responsibilities
Chairman
Chief Executive Officer
Senior Independent Director
• The effective running of the Board
• Direction and focus
• Guardian of the decision-making
process
• Providing challenge
• Ensuring the Board receives accurate,
timely and clear information
• Maintaining relationships with Executive
and Non-Executive Directors.
• Management of the Group
• Developing and proposing strategy
• Implementing Board decisions
• Maintaining an active dialogue with the
Chairman
• Leading shareholder communication.
• Supporting the Chairman on
governance issues
• 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 six Non-
Executive Directors (excluding the Chairman) and four Executive Directors. Five 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 and she will be stepping down in November 2022.
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
play an active role in the development of the strategy. Their experience and independence of thought has been particularly beneficial
during the discussions about the future ownership of the Group. They have provided both challenge and support throughout the
process to date.
Division of responsibilities
Governance
HomeServe plc Annual Report & Accounts 2022
70
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/our-board/
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/
Division of responsibilities
continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
71
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.
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.
Chief Executive
Responsible for the day to day running of the Group’s business and performance and the development and implementation of strategy.
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 80 and 81.
• 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 82 and 83.
• 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 86 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
120. The element on
the activities of the
Remuneration Committee
on pages 106 to 120 are
incorporated into this
statement by reference.
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
Governance
HomeServe plc Annual Report & Accounts 2022
72
Division of responsibilities
continued
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.
On 1 May 2022, Roisin Donnelly was appointed as a Non-Executive Director of Premier Foods plc. Roisin discussed the proposed
appointment with the Board during the recruitment process and it was agreed that, taking into account other commitments, she
had sufficient bandwidth to take on the role.
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. The Board has an annual strategy meeting to devise
and discuss the Company’s medium and long-term strategic focus and management development strategy. Due to the takeover
discussions, a number of ad hoc meetings were held in addition to the scheduled meetings, these have not been included in the
attendance table.
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
8/8
3/3
R Clemmow
8/8
R Harpin
8/8
2/3
T Rusin
8/8
3/3
T Breen
8/8
4/4
2/2
3/3
K Cliffe
8/8
3/3
4/4
2/2
3/3
S David
8/8
3/3
R Donnelly
8/8
3/3
J M B Gibson 1
1/1
1/1
E Fitzmaurice
8/8
3/3
4/4
2/2
O Grémillon
8/8
4/4
R McMillan
8/8
3/3
4/4
2/2
3/3
1 JM Barry Gibson stepped down on 18 May 2021.
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
73
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/about-us/
corporate-governance/committees
Short biographies of the members of the Executive Committee who are not on the Board, are set out on pages 76 to 77.
Governance
HomeServe plc Annual Report & Accounts 2022
74
Composition, succession and evaluation
Our Board
Tommy Breen (63)
Chairman
Appointed to the
Board: January 2021
(as Chairman in May 2021)
Committee
memberships:
N R P
Experience:
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:
Investor in and Director
of a number of private
companies
Richard Harpin
(57) Chief Executive
Appointed to the
Board: May 2001
Committee
memberships:
E P
Experience:
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
David Bower (50)
Chief Financial Officer
Appointed to the
Board: February 2017
Committee
memberships:
E P
Experience:
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
Ross Clemmow
(47) CEO EMEA
Appointed to the
Board: March 2021
Committee
memberships:
E
Experience:
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:
Non-Executive Director
of London City Airport
Limited
Tom Rusin (53)
CEO North America
Appointed to the
Board: May 2017
Committee
memberships:
E P
Experience:
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
Katrina Cliffe (55)
Senior Independent
Director (Independent)
Appointed to the
Board: May 2017
Committee
memberships:
R A N P
Experience:
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
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
75
Stella David (59)
Non-Executive
Director (Not
Independent)
Appointed to the
Board: November 2010
Committee
memberships:
P
Experience:
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
Roisin Donnelly
(60) Non-Executive
Director (Independent)
Appointed to the
Board: March 2021
Committee
memberships:
P
Experience:
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, digital,
significant experience
leading transformation
and turnaround including
major acquisitions and
divestments, international.
Principal
current external
appointments:
Non-Executive Director
of Premier Foods plc and
adviser to the Internet
Advertising Bureau Ltd
Edward
Fitzmaurice
(59) Non-Executive
Director (Independent)
Appointed to the
Board: May 2017
Committee
memberships:
A N R
Experience:
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:
Key areas of experience
and contribution:
Retailing, insurance,
significant operational
experience leading
consumer focused
businesses in regulated
sectors.
Principal
current external
appointments:
None
Olivier Grémillon
(42) Non-Executive
Director (Independent)
Appointed to the
Board: March 2019
Committee
memberships:
R
Experience:
Olivier is currently CEO of
Vivino, the global online
wine marketplace and
app. He was previously
Vice President, Global
Segments, at Booking.
com before which he was
the Managing Director
for Europe, the Middle
East and Africa at Airbnb.
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:
CEO, Vivino
Ron McMillan (69)
Non-Executive
Director (Independent)
Appointed to the
Board: October 2017
Committee
memberships:
A R N P
Experience:
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
Nomination Committee
Remuneration Committee
People Committee
Executive Committee
Audit & Risk Committee
Denotes Committee Chair
R
N
P
E
A
Governance
HomeServe plc Annual Report & Accounts 2022
76
Composition, succession and evaluation
Our Executive team
Bruce Aronow (56)
Chairman, eLocal
Committee memberships:
E
Experience:
Bruce is currently Executive Chair
of eLocal having served as Chief
Executive Officer, 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
Deb Dulsky (52)
Global CEO, HVAC
Committee memberships:
E
Experience:
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:
Marketing, digital transformation,
entrepreneurial start-ups.
Principal current external
appointments:
None
Mike Fairman (55)
CEO, Checkatrade
Committee memberships:
E
Experience:
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:
Business development, M&A, marketing,
international.
Principal current external
appointments:
None
Guillaume Huser (55)
CEO, HomeServe France
Committee memberships:
E
Experience:
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
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
77
Rob Judson (38)
Global Chief Automation Officer,
Membership, Chief Customer
Officer, USA
Committee memberships:
E
Experience:
Rob was appointed as Global Chief
Automation Officer and Chief
Customer Officer USA 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
and Director of Walsall and Bloxwich
Town Deal Fund
John Kitzie (68)
CEO, HomeServe UK
Committee memberships:
E
Experience:
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:
Strategy, retail, service delivery,
technology, partner management
Principal current external
appointments:
None
Anna Maughan (52)
Company Secretary
Appointed as Company
Secretary:
July 2008
Committee memberships:
E
Experience:
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, share
schemes.
Principal current external
appointments:
Trustee of, and Secretary to, the industry
wide Water Companies Pension
Scheme
Fernando Prieto (56)
CEO, HomeServe Spain
Committee memberships:
E
Experience:
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
Nomination Committee
Remuneration Committee
People Committee
Executive Committee
Audit & Risk Committee
Denotes Committee Chair
R
N
P
E
A
Governance
HomeServe plc Annual Report & Accounts 2022
78
Board composition
The Board is 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 74 and 75.
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 local restrictions and travel challenges are behind us, 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.
Length of tenure of Chairman and
Non-Executive Directors
Board Gender Diversity
0 - 3
years
2
4
1
3 - 6
years
10+
years
Board Independence
1
5
4
1
Executive Director
Chairman
Non-Executive (Independent)
Non-Executive (Non Independent)
Total board
M
F
M
F
M
F
Executive
Non-Executive
8
3
4
0
4
3
Composition, succession and evaluation
continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
79
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 the Directors so that any themes can be developed, and feedback investigated
in more depth. 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 FY21 review, the main areas identified by the Board for continued focus and the actions taken were as follows:
Area of focus
Actions taken
Ensuring that the new Chairman was given the support needed
to make his appointment a success
Tommy Breen has completed a comprehensive induction
programme. Due to the ongoing challenges of the pandemic,
most meetings have been by video but in person visits to a
number of HomeServe businesses have now been planned.
Improving the Non-Executive pipeline including the need for
increased diversity
The Non-Executive recruitment was paused when Tommy
took over as Chairman so that he had an opportunity to assess
the Board dynamic and consider skills gaps and succession.
The process restarted in Autumn 2021 and an offer was made
to a candidate in March 2022 although this did not result in an
appointment due to the takeover discussions. More detail on the
recruitment process is provided on page 80.
In FY22, Directors completed online evaluation questionnaires in January 2022 and Lintstock compiled a formal written report
summarising the Directors’ views. This report was discussed by the Board in March 2022, but that discussion coincided with the offer
for the business by Brookfield and it was felt that more detailed consideration of the output from the questionnaire should be deferred
so that priority could be given to more pressing matters.
Governance
HomeServe plc Annual Report & Accounts 2022
80
I am pleased to present the Nomination Committee report for the year ended 31 March 2022. Following a busy year in respect of
Board appointments in FY21, our efforts to improve the diversity of the Board continued in FY22 although disappointingly, we were
unable to make any appointments.
Members
Tommy Breen (Chairman from 19 May 2021)
Katrina Cliffe
Edward Fitzmaurice
Ron McMillan
J M Barry Gibson (Stepped down on 18 May 2021)
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
It was agreed in FY21 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 appointed Roisin Donnelly in March 2021, the process was paused when I took over as Chairman so that I could assess the
dynamic of the Board and consider any skills gaps and succession plans. The process resumed in Autumn 2021 and Katrina Cliffe
and I interviewed a number of candidates before selecting a small number for a short list. The short-listed candidates met with a
number of Board members and the feedback was considered by the Committee. An offer was made to a very suitable candidate in
March 2022 but this coincided with Brookfield emerging as a potential bidder for HomeServe and as a result, was not finalised.
Composition, succession and evaluation continued
Nomination Committee report
“We are committed to
ensuring that our Board is
appropriately diverse and
that it reflects diversity in
its broadest sense.”
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
81
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 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 People Committee regularly discusses the plans and the Nomination
Committee reviews the Board succession plans at least annually (and did so in July 2021).
A key issue that we need to address from a Non-Executive perspective is that the three members of our Audit & Risk Committee
all joined the Board in 2017 so there is a risk that they will all step down at the same time. We included recent and relevant financial
experience in the criteria for the search conducted in the year and the candidate we identified did fit this criteria.
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
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.
At the year-end 27% of the Board was female. Had it not been for the takeover discussions, I am confident that we would have increased
this. We welcome the new Listing Rule on diversity and inclusion and will continue to use our best endeavours to increase the diversity
of our Board over the next year.
More information on talent and diversity is provided in the Strategic report on pages 23 to 25.
Tommy Breen
Chairman
24 May 2022
Governance
HomeServe plc Annual Report & Accounts 2022
82
I am pleased to present the People Committee report in respect of the year ended 31 March 2022. It has been another challenging
year for our workforce as a result of the pandemic and it has been even more important to ensure that the Committee was able to
hear from the workforce about how they felt the business was handling the ongoing issues whilst continuing to move forward with
the matters on the People Committee agenda.
Members
Stella David (Chair)
Tommy Breen
Katrina Cliffe
Roisin Donnelly
Ron McMillan
David Bower
Richard Harpin
Tom Rusin
J M Barry Gibson (stepped down on 18 May 2021)
Responsibilities
Working alongside the Nomination Committee, 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, representatives from the
Group People team and the Company Secretary attend all Committee meetings.
Discussions during the year have been focused on the following:
• Development of our DE&I policy and targets
• Gender Pay Gap
• Apprenticeships
• Employee engagement including targets and action plans
• Recruitment and assessment methodology
• Hybrid working arrangements.
Composition, succession and evaluation continued
People Committee report
“It has been another
challenging year for our
workforce as a result
of the pandemic and
it has been even more
important to ensure that
the Committee was able
to hear from them.”
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
83
During the year, a People MI dashboard was developed to help the Committee to understand the issues and challenges facing our
businesses. This dashboard includes metrics in respect of headcount, attrition, absences, employee relations cases, engagement and
DE&I and is accompanied by commentary from each business to highlight any particular trends.
DE&I
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.
During the year, we discussed and agreed a DE&I policy and are working on short and medium-term targets which will apply across the
Group. The policy is available here: www.homeserveplc.com/media/sgznnesr/hs-dei-policy-vs-2-0-apr-2022.pdf
Workforce engagement
I am the nominated Non-Executive Director in respect of workforce engagement and my role is to ensure that the views and concerns
of the workforce are brought to the Board and taken into account. To support me in that role, we established an International People
Forum in FY20. Following the first year of operation, we took the opportunity to refresh the membership of the Forum and I was pleased
to welcome more frontline and operational representation to the group.
The Forum met twice during the year. Discussions have included the approach to hybrid working, DE&I and culture. The debate on
retaining the HomeServe culture and personality in a hybrid world was particularly insightful and will be extremely useful when planning
future communications, induction and training. The Forum’s thoughts and opinions on hybrid working have continued to have a real
influence on the approach taken by the Group.
I really appreciate the honesty and positivity that the members of the Forum bring to our interactions, and I would like to thank them for
their contribution during the year.
Going forward
It is clear that having a People Committee has made a real difference in accelerating our people related plans and strategy and having
reflected on this, the Board has decided to expand the remit of the Committee to cover wider ESG matters. The Committee will become
the ESG & People Committee during FY23 with a view to accelerating activity in other areas of our responsible business policy.
Stella David
Chairman
24 May 2022
Governance
HomeServe plc Annual Report & Accounts 2022
84
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
86 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 58 to 59 and page 65. The principal risks and uncertainties are
set out on pages 32 to 39.
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 strategic, 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 Directors 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.
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 bi-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.
Audit, risk and internal control
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
85
Risk assessment and risk registers
Our assessment of risk is approached from a top down and a bottom up perspective. Through the Executive Directors, 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 Directors 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
works 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.
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 58 to 59.
Governance
HomeServe plc Annual Report & Accounts 2022
86
I am pleased to present the Committee’s report for the year ended 31 March 2022.
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 (Chair)
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.
Committee Effectiveness
The effectiveness of the Committee is reviewed as part of the annual Board review process facilitated by Lintstock. The FY22 review
concluded that the Committee was operating effectively and benefited from a high-quality cycle of work.
“I shall continue
to 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 the audit.”
Audit & Risk Committee report
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
87
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/
Summary of meetings in the year
The Committee usually meets three times in the year and did so in FY22. Details of meeting attendance are set out on page 72. 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
May 2021
November 2021
February 2022
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
●
Governance
HomeServe plc Annual Report & Accounts 2022
88
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 58 to 59.
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.
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.
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-19.
Carrying value of goodwill
The total goodwill balance at 31 March 2022 of £667.9m 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.
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-19
and satisfied itself that no impairment was required.
Business combinations
During the year the Group completed a number of acquisitions.
The Committee reviewed the Group’s accounting for
acquisitions and satisfied itself that it was appropriate.
Covid-19 impact
The Covid-19 pandemic has had an impact in all of HomeServe’s
territories.
The Committee considered the impact of Covid-19 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 pandemic.
eServe impairment costs
A review of the eServe system was 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.
The Committee considered the review of eServe and the
impairment reviewed and satisfied itself that carrying value was
completely impaired.
SaaS accounting
As clarified by the International Financial Reporting
Interpretations Committee in April 2021, configuration and
customisation costs on SaaS arrangements should only be
capitalised where an entity controls the underlying SaaS
software, or a separate intangible asset has been generated that
meets the criteria for capitalisation under IAS 38.
The Committee reviewed the Group’s application of the
agenda decision, including the decision not to restate the
impact on the comparative financial information on the
grounds of materiality. The Committee satisfied itself that
the revised accounting policies and their application for the
capitalisation of intangible assets are compliant with the
agenda decision.
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.
Audit & Risk Committee report
continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
89
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 154 to 155.
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-19 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-19.
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 59.
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 page 58.
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.
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.
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 FY22, 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 Financial Reporting Council (‘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 84 to 85.
Details in respect of the principal risks and uncertainties are set out on pages 32 to 39.
Governance
HomeServe plc Annual Report & Accounts 2022
90
Regulation and compliance
The Group operates in a regulated marketplace 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 established businesses outside the UK 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
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.
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 FY22 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.
Having considered the qualifications, expertise and resources of Deloitte LLP, the Committee is satisfied that Deloitte LLP continues to
provide constructive and independent challenge to management and consistently demonstrates a realistic and commercial view of the
business. As such, the Committee has concluded that the audit process is effective and has therefore recommended to the Board that
the re-appointment of Deloitte LLP should be proposed at the forthcoming Annual General Meeting.
It is our intention to tender the audit for the period ending 31 March 2025 in accordance with the auditor rotational guidelines and the
accompanying transitional rules. This process will be completed during FY23.
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, 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 £1.8m 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.
Audit & Risk Committee report
continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
91
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.
During the year, the Committee received 81 reports in respect of the following areas:
Finance
Key financial controls and processes including balance sheet control reviews, purchase to pay, order to cash and record to report
cycles.
Operations
Key operations processes including fulfilment, contractor management, business continuity planning and disaster recovery,
compliance and risk management.
IT controls
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.
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
24 May 2022
Governance
HomeServe plc Annual Report & Accounts 2022
92
I am pleased to present the Remuneration report for the year ended 31 March 2022.
FY22 – the year in review
The pandemic has continued to have an impact on the work of remuneration committees, particularly in respect of incentives
and retention. The labour market is challenging, and the rising cost of living is a concern for all of our employees. The Committee
continues to focus on ensuring that our remuneration arrangements are consistent with our company purpose and strategy and
deliver rewards that clearly link to the successful implementation of our long-term plans.
We delivered good financial results in respect of FY22 with 15% growth in adjusted profit before tax, the key financial metric used
for our annual bonus scheme. There was also good performance in respect of our non-financial measures which, combined
with excellent personal performance, has resulted in a bonus payment for the Executive Directors at 66 - 75% of the maximum
available. The Committee believes this is a fair outcome for the strong business performance over the course of the year and has not
exercised any discretion in respect of the performance outcome.
In respect of longer-term performance, the LTIP awards granted in 2019 will only partially vest in June 2022. The awards were
based 25% on relative total shareholder return (TSR) performance and 75% on adjusted earnings per share (EPS) performance. The
threshold in respect of TSR performance was not achieved, but EPS growth of 9.54% was delivered, so this element of the awards
will partially vest. Overall, 23.93% of the awards will vest. 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 reported last year, we increased the size of the Performance Share award granted in FY22 from 150% to 200% of basic salary. This
higher award level was in line with the 200% limit set out in the Directors’ remuneration policy, although we had chosen to grant at
the lower 150% level in the previous few years. To reflect the higher potential reward, we made 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. 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 internal and external forecasts.
This level of EPS growth required for an LTIP award is amongst the highest in the market.
The Committee was very aware that HomeServe’s share price fell following the announcement of our results in May 2021 and
decided that it would be appropriate to take this into account when granting awards under the LTIP. The price used to calculate the
number of shares in the Performance Awards was £10.37, which was the closing mid-market price of a HomeServe plc share on
17 May 2021 (the day before the announcement of the Preliminary Results for the year ended 31 March 2021). This was significantly
higher than the share price immediately prior to the date of grant of the awards (£9.675). The use of the higher share price means
that Executives did not benefit from receiving a higher number of shares in their Performance Award because of the share price
performance following the results announcement.
Directors’ remuneration report
Annual statement
“The Committee
continues to focus
on ensuring that
our remuneration
arrangements are
consistent with our
company purpose and
strategy and deliver
rewards that clearly
link to the successful
implementation of our
long-term plans.”
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
93
Remuneration at a glance
Single Total Remuneration Figure (£000)
Annual Bonus Outcome
Weighting
% Payable at Threshold
Threshold
Maximum
Actual
% Payable
Financial
measures
Adjusted Group profit before tax
40%
10%
£215.0m
£220.0m
£220.3m
40%
Non financial
measures
Customer growth
15%
3%
8,614k
8,819k
8,373k
0%
Trades growth (Checkatrade)
5%
2%
50.0k
59.4k
46.9k
0%
Trades growth (Habitissimo)
5%
2%
11.8k
13.1k
10.8k
0%
Customer dissatisfaction 1
3.7%
0.73%
5.0%
4.5%
4.5%
3.7%
Customer 5 star rating 1
11.3%
2.27%
4.64
4.68
4.74
11.3%
Personal objectives
20%
11 - 20%
1 Customer dissatisfaction is measured as a weighted average across our UK and Spanish
Membership businesses and the 5 star rating is measured as a weighted average across our
North American, French and Spanish Membership businesses.
LTIP Outcome
Relative TSR (25% weighting)
Threshold
Stretch
HomeServe
74.7%
-16.1%
0%
50%
100%
22.6%
Adjusted earnings per share (75% weighting)
Threshold
Stretch
HomeServe
15%
9.54%
6%
0%
10%
15%
20%
9%
Richard Harpin
Ross Clemmow
David Bower
Tom Rusin
1,468
1,125
Key:
Salary
Benefits
Pension
Annual Bonus
LTIP
Other
500
£000's
1,000
1,500
0
742
1,029
FY22 66-75% payout
23.93% vesting
Governance
HomeServe plc Annual Report & Accounts 2022
94
Proposed Changes to the Directors’ remuneration policy
We indicated last year that we were minded to review our Directors’ remuneration policy during FY22. We completed this review
during the year and developed a set of proposals for a new policy which we shared in advance with major shareholders. Having
received generally positive feedback during this consultation process, we will be presenting a revised policy for shareholder approval
at the forthcoming AGM. Although this is one year earlier than is technically required under the regulations, we believe that now is
the right time to make some important changes.
a) Background
The existing Directors’ remuneration policy was last approved at the AGM in 2020. We reviewed it in the context of the ongoing
evolution of HomeServe’s strategic priorities and changes in institutional investors’ preferences and expectations on executive
pay. In proposing a new policy, we seek to retain key features of the existing approach which have served HomeServe and its
shareholders well, namely the clear link with performance and the focus on equity as a major part of the reward package. We
have decided, however, to simplify the current structures and put in place incentives which are relevant to those Directors who
lead our major divisions.
Critically, in light of the importance of the North American market to HomeServe’s future growth, and the current retention and
reward pressures in the United States in particular, we have specific proposals in respect of Tom Rusin, who serves on the Board
as CEO, North America. The changes are explained in more detail below. Other than for Tom, there is no change in the level of
remuneration under the new Policy.
b) A new approach to long-term incentives
To simplify and provide greater alignment of equity incentives throughout the organisation, we will cease making matching
awards of shares under the LTIP. Therefore, with effect from the financial year beginning 1 April 2022, Executive Directors will
only receive awards of performance shares. To reflect the absence of matching awards, we propose to increase the maximum
performance award grant limit from 200% to 350% of salary (and are seeking shareholder approval at the AGM for amended
LTIP rules to allow for this higher limit). Grants to the Executive Directors will normally be made at a level of 250% of basic salary,
although a different approach will apply to Tom Rusin, as explained below.
As is normal, the new policy provides flexibility to set appropriate performance conditions for each year’s grant. For the grant
we intend to make after the AGM, we propose a structure with three equally-weighted metrics: (1) EPS growth, similar to the
approach taken for prior year awards; (2) relative TSR performance, measured against companies ranked 31-200 in the FTSE
index (i.e. the same as used to date for the matching awards) and; (3) return on invested capital (ROIC). This latter metric is new
and will ensure that the management team is closely focused on efficient capital allocation as HomeServe enters its next growth
phase. For all three measures, the Committee will set challenging performance targets.
c) Additional LTIP award for Tom Rusin
In the US, there is currently a phenomenal level of demand for top-quality executives in relevant sectors of the market, which
is putting pressure on our ability to recruit and retain the very best talent. We are in the process of restructuring HomeServe’s
incentive provision for senior leaders in the US to better match the typical packages on offer in comparable companies. In Tom
Rusin’s case, we have some concerns that his current remuneration is not competitive when measured against practice at US
companies of a similar size to HomeServe’s North American division. This is a particular issue given the significant level of interest
from private equity in comparable businesses in the US, and creates a retention risk, which is of concern to the Committee and
the Board given Tom and his team’s importance to leading this crucial part of our business.
We have given considerable attention to the appropriate incentive arrangements for the US business. There is significant use
of restricted share awards at all senior levels in the US market and, for the US Membership division we will be supplementing
existing performance share awards with a restricted share award. However, as Tom Rusin serves as an Executive Director, we
are keen to ensure that all of his long-term incentives are based on the achievement of stretching performance conditions.
Therefore, for Tom, we have decided to enhance his long-term incentive provision through an additional award of performance
shares each year. In line with the approach for the other Executive Directors, he will receive a performance award at a level of
250% of basic salary with vesting subject to the same EPS, TSR and ROIC measures set out above. In addition, he will receive
a further 100% of salary performance award, which will vest subject to the achievement of stretching targets relating to profit
growth and ROIC in the North American business over the three-year performance period.
This will provide Tom with an equity incentive which, although structured differently to US practice, is competitive in the
local market and is more aligned to his direct reports who will have their entire performance share award based on US profit
performance. This will also ensure that there remains full alignment to the interests of HomeServe shareholders in that any
benefit will depend on challenging targets being met.
Directors’ remuneration report continued
Annual statement continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
95
d) Annual bonus
The annual bonus scheme for the Executive Directors is currently limited to a maximum of 100% of basic salary, payable in cash.
In partial recognition of the removal of matching awards, we are increasing this to 150%. At the same time, the level of bonus for
on-target performance will reduce slightly from 80% to 75% of salary. We are also introducing a share-based element, whereby one-
third of any net bonus must be invested in shares which are held for a minimum of three years, thus ensuring ongoing alignment
with shareholders.
At present, 40% of Directors’ bonuses is based on Group PBT performance, with the remaining 60% subject to achievement of
a mixture of Group non-financial and personal objectives. Under the new Policy, we will place a greater emphasis on financial
performance, shifting to a 60%/40% financial/non-financial split, as considered appropriate given the higher bonus opportunity.
For Richard Harpin, the CEO, and David Bower, the CFO, the focus for the FY23 bonus scheme will remain on Group PBT for the
financial element, and a Group-wide customer measure for half of the non-financial element. For the other half, we have introduced
Group strategic and ESG metrics linked to specific priorities for the business for the coming year.
For Ross Clemmow, the CEO, EMEA, and Tom Rusin, we have tailored the metrics more closely to their specific area of responsibility.
Half of the PBT element will be based on Group performance, recognising their Group roles as Executive Directors, and half on
divisional performance. The customer measure will relate to divisional performance.
Full details of the specific targets will be included in next year’s Directors’ remuneration report.
e) Other matters
No other major changes have been made to the remuneration policy. We will continue to operate a shareholding requirement
which, at 300% of basic salary, is higher than the market norm. Our post-employment shareholding requirement is in line with good
practice, although we have clarified the precise wording to reflect standard practice. As promised last year, the 20% of salary pension
contribution rate for the CEO and CFO will reduce to the workforce average, currently 6% of salary, on 1 December 2022.
Basic salary levels for the Executive Directors
For Tom Rusin, the Remuneration Committee decided that given the pressing retention issues in the context of the US market
environment, it was necessary to adjust his salary as soon as possible. Therefore, we agreed that Tom’s salary would increase from
$679,575 to $780,000 (an increase of 14.8%) with effect from 1 January 2022. In reaching this decision, we concluded that the situation
in the US market was such that the risks of delaying consideration of an increase for the successful leader of our North American
business were too high.
We are of course cognisant of the impact of the salary increase on the other aspects of Tom’s pay discussed above and believe that,
together, the salary increase and the enhanced long-term incentive, represent a compelling proposition that will retain Tom for the
long-term and enable the US business to continue to deliver outstanding performance. We have checked Tom’s revised package against
relevant benchmark data for US companies of a comparable size to the North American division, and while it is still below US market
rates, it is now considered to be sufficiently competitive. Also as noted above, we are committed to retaining a UK style equity package
with all awards linked to stretching targets, rather than a US package incorporating an element of restricted shares.
The Committee has reviewed the salaries of the other Executive Directors to apply with effect from 1 July 2022 and has agreed increases
for Richard Harpin, David Bower and Ross Clemmow of 3%. This compares to an average increase for both UK and US based employees
of 5%. Tom Rusin will not receive an increase as his salary was reviewed with effect from 1 January 2022 as explained above.
Remuneration for the wider workforce
The Committee continues to review workforce remuneration and related policies to ensure that there is 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.
As indicated above, a substantial amount of time has been taken during FY22 to review and consider the appropriate long-term incentive
provision for key employees within the business. We are committed to ensuring that HomeServe operates remuneration practices at all
levels that are fair and appropriate and aligned to our values whilst enabling pay to be set at a level necessary to attract, incentivise and
retain high-calibre individuals, while not overpaying.
Governance
HomeServe plc Annual Report & Accounts 2022
96
Conclusion
The Committee believes that the updated remuneration policy will provide a simpler and stronger link between business (and,
where appropriate, divisional) performance and individual reward for the Executive Directors. With the exception of Tom Rusin –
where an enhancement to his package is being proposed in light of very specific market conditions in the US – overall incentive
opportunities as a percentage of salary are not increasing, when the removal of the matching award element is considered. This is
illustrated by the table below, which shows the “on-target” and maximum levels of reward under the current and proposed policies
(expressed as a % of basic salary), as it applies to all Executive Directors except Tom Rusin.
Current
Current (reflecting the higher
PSP award in FY22)
Proposed
On-target
Maximum
On-target
Maximum
On-target
Maximum
Annual bonus
80%
100%
80%
100%
75%
150%
Matching shares
90%
150%
90%
150%
n/a
n/a
Performance shares
90%
150%
120%
200%
150%
250%
Total
260%
400%
290%
450%
225%
400%
For the annual bonus, the on-target level of payout is reducing from 80% of the maximum award to 50%, consistent with investor
expectations. For long-term incentives, we have assumed a 60% level of vesting for on-target performance, which is consistent with
past assumptions.
The Committee is satisfied that the updated policy will serve us well over the coming years and continue to motivate and retain
our Executive Directors. I would welcome your support for the new policy and the other remuneration related resolutions at the
forthcoming AGM.
Recommended offer
On 19 May 2022, Brookfield Infrastructure Funds announced the terms of a recommended offer for the Group. The Remuneration
Committee is in the process of carefully considering the full implications of the offer, including in respect of the impact on
participants in the various share plans operated by HomeServe.
Katrina Cliffe
Chair of the Remuneration Committee
24 May 2022
Directors’ remuneration report continued
Annual statement continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
97
Directors’ remuneration report continued
Directors’ remuneration policy
The Directors’ remuneration policy sets the overall framework for the remuneration of the Directors of the Company. The policy must
be approved by shareholders by way of a binding vote. All remuneration payments and payments for loss of office must be consistent
with the terms of the approved remuneration policy. If the Company wishes to make a payment which is not consistent with the policy,
it must seek shareholder approval for an amendment to the policy before the payment can be made.
Subject to shareholder approval, this policy will apply from the date of the 2022 AGM.
The policy was developed by the Remuneration Committee following a detailed review undertaken in conjunction with the
Committee’s external advisers. This considered the ongoing evolution of HomeServe’s strategic priorities and changes in institutional
views and the broader corporate governance environment since the policy was last approved in 2020. The review also took into account
specific issues relating to the competitiveness of the North American markets and the need to put in place appropriate retention and
reward structures to mitigate the risks of losing key people in these markets. The Committee considered a number of alternative policy
approaches before agreeing on a set of proposals which it communicated to major shareholders in a consultation exercise.Taking into
account the generally positive comments received from those consulted, the Committee agreed to take forward the policy proposals to
shareholders by way of a formal vote at the 2022 AGM. The Committee was aware of the need to avoid conflicts of interest during the
development of the policy. No Director was responsible for determining his or her own remuneration.
The remuneration policy remains based on the following key principles:
• To clearly align rewards with the Group’s financial and operational performance;
• To ensure that remuneration – particularly 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; and
• To attract, retain and motivate high-calibre executives.
Executive remuneration is structured in two distinct parts: fixed remuneration of basic salary, pension and benefits and variable
performance-related remuneration in the form of an annual 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 key changes to the policy approved in 2020 are set out below:
• In the interests of simplification, we have removed the matching shares element from the long-term incentives. Only performance
shares will be granted, with effect from the LTIP awards to be made in 2022.
• To reflect the absence of matching awards, the maximum grant limit for performance shares has increased from 200% to 350% of
basic salary. However, with the exception of awards to be made to Tom Rusin, grants to Executive Directors will normally be made at a
level of 250% of basic salary. Tom Rusin will receive an additional award at a level of 100% of basic salary, with performance conditions
specific to his role.
• The annual bonus limit has increased from 100% to 150% of basic salary, to also reflect the absence of matching awards. We also
confirm that the payout for “on-target” performance will be 50% of the maximum potential award, consistent with general investor
expectations.
• Two-thirds of any bonus will be paid in cash, with the remaining one-third invested in shares which must be held for a minimum of
three years. The introduction of bonus deferral helps provide for ongoing alignment with shareholders in the absence of matching
shares.
• We have clarified that annual bonuses may be based on divisional as well as Group performance. This is to ensure that a portion of
bonuses for the Executive Directors with divisional responsibilities can be directly linked to the performance of their divisions.
• We have confirmed that pension provision for all Executive Directors will be aligned with the rate for the wider workforce from
1 December 2022, in line with our prior commitments and what is now standard market practice.
We have specified that the post-employment shareholding requirement applies to the lower of (1) 200% of basic salary and (2) the actual
shareholding at the point of departure, consistent with standard practice and the guidance of the Investment Association.
Additional minor changes to the wording of the policy have also been made for the purpose of clarification.
Governance
HomeServe plc Annual Report & Accounts 2022
98
The policy for the remuneration of Executive Directors is set out below.
Element
Purpose and link to business strategy
Performance Period
Operation (including performance measures and maximum limits)
Basic salary
To attract, motivate
and retain individuals of
the right calibre whilst
reflecting their particular
skills and experience and
to provide a competitive
base salary compared
with similar roles in
similar-sized companies.
n/a
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
in the relevant territory.
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 considers the
impact of any increase to base salaries on the total remuneration
package.
Salaries are usually reviewed annually, with any changes normally
taking effect from 1 July.
Performance
related bonus
To drive and reward the
short-term operating
performance of
the Company and
encourage the delivery
of consistently good
customer and other
stakeholder outcomes.
Annual
(determined
after the year-
end).
Annual performance bonuses are determined by reference to
achievement against a mix of financial, non-financial and strategic/
personal objectives. Before any bonus is payable a minimum
threshold level of financial performance must be achieved.
Bonuses are based on Group performance, Divisional performance
(where appropriate) and individual performance. Individual
performance accounts for no more than 20% of the overall bonus
opportunity.
The maximum potential quantum is 150% of base salary. No more
than half of this amount is payable for on-target performance.
The Committee retains the discretion to review and set the choice of
bonus plan measures and respective weightings annually to ensure
that they reflect the changing needs of the business, are aligned
with the Group’s business strategy and so that arrangements are
consistent amongst the senior executive team. Performance targets
are linked to the Group’s strategic and operational objectives.
The Committee has the discretion to modify the amount payable, to
reflect wider financial and business performance or other relevant
factors.
Bonuses are payable in cash and one-third of any bonus paid (net of
tax) must be invested in shares having a three-year holding period.
Directors’ remuneration report continued
Annual remuneration policy continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
99
Element
Purpose and link to business strategy
Performance Period
Operation (including performance measures and maximum limits)
Long-term
incentives
To drive long-term
delivery of the Group’s
objectives, to align
Directors’ interests with
those of the Company’s
shareholders and other
stakeholders and to
encourage exceptional
performance.
Three
years plus
a two-year
post vesting
holding
period.
Awards of performance shares may be granted each year under
the Long-Term Incentive Plan. Shareholder approval to amend the
current LTIP rules will be sought at the 2022 AGM (the current rules
were approved by shareholders in 2018).
The maximum limit is 350% of base salary. Awards for Executive
Directors based outside the US will normally be granted at a level of
250% of base salary. Awards for Tom Rusin (and, if relevant during
the remuneration policy period, any successor as head of the North
American business) will normally be granted at a level of 350% of
base salary, i.e. inclusive of an additional 100% award on top of the
“standard” 250% of salary award.
Awards of performance shares vest after three years, subject to the
achievement of challenging performance conditions. Performance
metrics and targets are agreed by the Committee each year prior to
the grant of awards.
Measures and weightings for awards to be made under the Long-
Term Incentive Plan in 2022 (subject to approval of the remuneration
policy and the LTIP rule amendment at the AGM) are:
• for the standard award (250% of salary), EPS growth (33.33%),
Relative TSR (33.33%) and ROIC (33.33%) each measured over three
years;
• for the additional award pertaining to Tom Rusin (100% of base
salary), profit growth (50%) and ROIC (50%) for the North America
division measured over three years.
Targets are set using a sliding scale and no more than 25% of an
award will vest for achieving the threshold performance hurdle.
The value of dividends payable over the vesting period may be
awarded on any shares vesting under the Plan.
A two-year post vesting holding period applies to all vested shares.
The Committee may use its discretion to modify the number
of shares which vest, to reflect wider financial and business
performance or other relevant factors.
Pension
To provide benefits
comparable with
similar roles in similar
companies, assist
attraction and retention
and reward sustained
contribution.
n/a
UK-based – Defined Contribution:
Effective 1 December 2022, all UK-based Directors may receive
a pension allowance in line with the majority of the workforce
(currently 6% of salary).
Annual contributions for new appointments since the date of
approval of the 2020 remuneration policy are aligned to the majority
of the workforce (currently 6% of salary). Annual contributions
for Directors appointed prior to this are set at 20% of salary. This
will reduce to the level received by the majority of the workforce
(currently 6%) on 1 December 2022.
The pension allowance can 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.
US-based – Defined Contribution:
Annual contributions of up to 4% of basic salary paid into the 401(k)
plan. This is aligned with the provision for the majority of the wider
workforce in the United States.
Governance
HomeServe plc Annual Report & Accounts 2022
100
Element
Purpose and link to business strategy
Performance Period
Operation (including performance measures and maximum limits)
Other
benefits
To provide a competitive
and cost-effective
package of benefits to
assist with recruitment
and retention of
individuals of the right
calibre.
n/a
Other benefits may include a fully expensed car (or cash alternative),
fuel allowance, private health cover (for the individual, partner and
dependent children), death in service benefits (up to 8 x salary) and
income protection 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.
All Employee
Share Plans
To encourage employee
share ownership.
n/a
The Executive Directors may participate in any employee share plans
offered by the Company on the same terms as other employees.
The policy for the remuneration of Non-Executive Directors is set out below.
Chairman
and Non-
Executive
Directors’
fees
To attract and retain Non-
Executive Directors of the
right calibre to oversee
the implementation of
our business strategy.
n/a
Non-Executive Director fees are determined by the Board within the
limits set by the Articles of Association. 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 the 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.
Directors’ remuneration report continued
Directors’ remuneration policy continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
101
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 opportunity comes from variable pay with careful consideration
given to the choice of performance metrics to ensure that executives are not encouraged to take inappropriate risks.
The choice of measures may change for future award cycles, but for FY23 the Group measures will be based on the following:
Metric
Type of Award
Link to strategy
Profit Before Tax
Bonus
Core short-term profitability metric
Growth in Customers and Trades
Bonus
Core non-financial top line volume metric aligned with our growth strategy
Reduction in Customer
Dissatisfaction
Bonus
Core non-financial quality metric that contributes to long-term customer retention
and reflects operational improvement
ESG
Bonus
Core non-financial metrics relating to Environmental, Social and Governance strategy
Personal Strategic Objectives
Bonus
Up to three personal strategic objectives relevant to each Executive Director
Earnings per Share (EPS)
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.
Total Shareholder Return (TSR)
LTI
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.
Return on Invested Capital (ROIC)
LTI
This measures the percentage return earned on invested capital and shows how
efficiently funds are being used to generate income.
In addition to the above Group measures, the Executive Directors with specific divisional responsibilities (Tom Rusin and Ross Clemmow)
will have a portion of their bonus based on divisional profit before tax growth and reduction in divisional customer dissatisfaction. The
purpose of this is to ensure that a significant proportion of their annual bonus is based on the performance of the parts of the business
for which they are directly responsible. In addition, the extra performance share award to be granted to Tom Rusin in line with the new
remuneration policy depends on the performance of the North American division over the three-year performance period, again
reflecting his responsibilities for leading this critically important part of HomeServe’s business.
If required, the Committee would consult with shareholders in advance of the introduction of new measures to be applied to future
award cycles.
Remuneration Committee discretion
The Committee can exercise discretion in a number of areas when operating the incentive schemes, in line with the relevant rules of
the schemes. This includes in respect of the choice of participants, the size of awards in any year (subject to the limits in the policy table
above), the determination of the treatment for leavers (subject to the scheme rules and the provisions of this remuneration policy) and
the treatment of outstanding awards in the event of a change of control.
Malus and Clawback
The Committee has discretion to determine whether exceptional circumstances exist which justify whether any or all of bonus award
(cash or shares) or vested/unvested LTIP award should be forfeited, even if already paid. Examples of exceptional circumstances
include but are not limited to, material misstatement of financial results, an error in assessment of performance, the use of misleading
information, misconduct on the part of the individual, corporate failure or the Company suffering reputational damage. The clawback
provisions are in place for a period of three years after the date of bonus payment or vesting of LTIP awards.
Shareholding requirement – in employment
Executive Directors and Non-Executive Directors are required to build up and retain a minimum shareholding in the Company. The
shareholding requirement for each Director is 300% of annual basic salary or fee. The requirement is normally expected to be met within
five years of appointment.
If the holding requirement 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 at least 50% of the net proceeds in the Company’s shares until the holding requirement is achieved.
Governance
HomeServe plc Annual Report & Accounts 2022
102
Shareholding requirement – post employment
The requirement for Executive Directors to continue to hold shares after leaving ensures they continue to share a level of risk with
shareholders and maintain alignment with their interests. The post-employment requirement for Executive Directors is 200% of base
salary calculated at their leave date (or maintenance of their actual holding percentage if lower), expressed as a number of shares
and held for a period of two years. The requirement applies to shares awarded after the implementation of the 2020 remuneration
policy. The calculation excludes the value of any awards not yet vested for ‘good leavers’ that will vest according to the normal
schedule (and which in any event must be held for the required holding period). The calculation includes any recently vested awards
which continue to be subject to a holding period, even after employment.
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. We have differences in pay and benefits across the Group which reflect specific accountabilities and labour markets. 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 to ensure they
remain competitive in the countries in which we operate.
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 variable pay, delivered through annual bonus and LTI opportunities 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
business 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. As noted in the annual statement from the Chair of the Remuneration Committee, we are introducing restricted shares
in the US in FY23 to reflect the specific competitive pressures in that market, although such an approach is not being extended to the
US-based Executive Director. All eligible employees are able to participate in the HomeServe One Plan, a share incentive plan. The
One Plan was reviewed during FY21 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 in the relevant
territory 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 Committee Chair has met with the International People Forum (established to facilitate workforce engagement) and there
was a useful discussion about executive pay and the reasons why it can differ from workforce arrangements and in particular the
requirement for Executive Directors to invest in HomeServe shares and for a high proportion of their pay to be delivered in shares
through the LTIP.
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 review of the new
policy to be voted on at the 2022 AGM. A detailed letter was sent to major shareholders and governance advisers and all of them
were offered a meeting with the Chair of the Committee.
Directors’ remuneration report continued
Directors’ remuneration policy continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
103
Remuneration scenarios for Executive Directors
The chart below details the composition of each Executive Director’s remuneration opportunity and how it varies at different levels of
performance under the proposed policy set out above. It demonstrates the balance between fixed and variable pay at threshold, on-
target and maximum performance levels.
1 Tom Rusin is paid in USD and the USD amounts have been converted to GBP for illustrative purposes.
Assumptions
Fixed:
fixed pay only (salary plus benefits plus pension).
On target:
target annual bonus of 75% of salary (50% of maximum) plus target LTIP awards in FY23 of 150% of salary for Richard Harpin, David Bower and Ross Clemmow and
210% of salary for Tom Rusin. (60% of maximum)
Maximum:
maximum annual bonus of 150% of salary plus maximum LTIP awards in FY23 of 250% for David Bower, Ross Clemmow and Richard Harpin. The maximum LTIP
award in FY23 for Tom Rusin is 350% of salary.
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.
Salary levels (on which other elements of the packages are calculated) are based on salaries as at 1 July 2022.
The value of taxable benefits is based on the actual values paid in FY22.
Richard Harpin and David Bower receive a pension allowance of 20% of basic salary. This reduces to 6% on 1 December 2022.
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.
Remuneration (£000's)
Fixed
Fixed
Fixed
Fixed
On Target
On Target
On Target
On Target
Maximum
Maximum
Maximum
Maximum
D Bower
R Clemmow
R Harpin
T Rusin 1
£4,500
£4,000
£3,500
£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
£742
$818
100%
$3,041
27%
19%
54%
£557
100%
£454
100%
£1,600
35%
22%
43%
£2,411
£2,991
23%
29%
48%
£1,381
33%
22%
45%
£2,617
£2,102
22%
29%
49%
$6,083
$4,718
17%
25%
58%
100%
£2,132
35%
22%
43%
£3,213
£3,986
23%
29%
48%
Key:
Fixed pay
Annual Bonus
LTIP
LTIP value with 50% share price growth
Governance
HomeServe plc Annual Report & Accounts 2022
104
Executive Directors’ service agreements
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
Date of contract
D Bower
3 February 2017
R Clemmow
4 March 2021
R Harpin
18 January 2002
T Rusin
4 April 2018
Policy on payment for loss of office
Should notice be served, the Executive Directors 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 up to twelve months’
base salary, benefits and pension, again normally phased over the unexpired original period of notice.
In the event of cessation of employment, the executives may still be eligible for a discretionary performance related payment for the
period worked if the Committee deems the individual to be a ‘good leaver’. 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 specific
circumstances where ‘good leaver’ provisions apply at the Committee’s discretion. Such circumstances include death, ill-health, injury,
disability, retirement, transfer of employment or any other reason at the discretion of the Committee.
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). Other than in respect of death, the post-vesting holding period will continue
to apply in ‘good leaver’ circumstances.
In determining whether an Executive Director should be treated as a ‘good leaver’ and the extent to which their award may vest, the
Committee will consider 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 and no holding period).
Policy on recruitment remuneration
Base salary levels will be set in accordance with the approved remuneration policy applicable at the time of appointment, taking
account of the individual’s skills, experience and their current remuneration package. Where it is appropriate to offer a lower salary
initially, a series of increases (in excess of the average for the wider workforce) to the desired salary positioning may be given over
subsequent years subject to individual and Company 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 a non-UK based Executive Director
appointment (which may include the relocation of an existing UK-based 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).
Directors’ remuneration report continued
Directors’ remuneration policy continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
105
The structure of the variable incentive pay element will be in accordance with the approved remuneration policy applicable at the
time of appointment. This means the maximum annual bonus award in any year would be 150% of salary, with one-third of any bonus
payment required to be invested in shares. The maximum LTIP performance shares award would be 250% of salary for non US-based
Executive Directors and 350% of salary for a US-based Executive Director. LTIP awards may be made shortly following an appointment
(assuming the Company is not in a closed period). Benefits consistent with those available to other Executive Directors under the
approved remuneration policy applicable at the time will be offered, taking account of local market practice. The Committee may
also agree for the Company to meet the costs associated with the recruitment, such as for example legal fees, and certain relocation
expenses or provide tax equalisation as appropriate.
Performance share awards would be granted on a consistent basis to the other Executive Directors. In the case of the annual
performance 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 join.
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.
In the case of an internal promotion, any outstanding variable incentive pay awarded in relation to the previous role will be allowed to
pay out according to the original terms.
The service contract for a new appointment would be in accordance with the policy for the current Executive Directors.
Fees for a new Chairman or Non-Executive Director would be set in line with the approved policy applicable at the time of
appointment.
Non-Executive Directors’ letters of appointment
Non-Executive Directors serve under letters of appointment for periods of three years. Fees are set in line with the approved policy
applicable at the time of appointment. No compensation is payable to the Chairman or Non-Executive Directors if they are not
re-elected at the AGM. Non-Executive Directors (including the Chairman) otherwise have a notice period of three months, but no
liquidated damages are payable.
Details of Non-Executive Directors’ current three-year appointments are as follows:
Name
Date of contract
T Breen
27 January 2021
K Cliffe
23 May 2020
S David
23 November 2019
R Donnelly
25 March 2021
E Fitzmaurice
23 May 2020
O Grémillon
29 March 2022
R McMillan
27 October 2020
External Appointments
Executive Directors, with the approval of the Board, may hold one external appointment as a Non-Executive Director of another
company and can retain any fees received.
Governance
HomeServe plc Annual Report & Accounts 2022
106
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, subsequent relevant reporting regulations
and 9.8.6R of the Listing Rules. The annual report on remuneration is put to an annual advisory shareholder vote each year and this
report will be subject to a vote at the 2022 Annual General Meeting.
Remuneration Committee Members
Katrina Cliffe (Chair)
Tommy Breen
Edward Fitzmaurice
Olivier Grémillon
Ron McMillan
JM Barry Gibson (stepped down on 18 May 2021)
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, Tommy Breen should be a member of the
Committee as he was independent on appointment. He takes no part in discussions relating to his own remuneration.
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 considering 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
• Reviewing workforce remuneration and related policies; in this regard, the Committee reviews internal relativities and pay ratios,
and receives inputs to its meetings to provide a full picture of 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.
The Committee’s terms of reference are available on our website: www.homeserveplc.com/who-we-are/governance/
committees
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.
Directors’ remuneration report continued
Annual report on remuneration
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
107
UK Corporate Governance Code
As indicated in the compliance statement on page 63, 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 FY22, with a couple of minor
exceptions. The Committee will align the pension contribution rate for the CEO and the CFO to that of the wider workforce on 1
December 2022 and so will be compliant with Provision 38 of the Code from that time.
The Committee has considered the principles set out in Provision 40 of the Code and explains below how these have been addressed:
• Clarity: The proposed Directors’ remuneration policy (subject to shareholder approval at the 2022 AGM) is set out on pages 97 to
105. 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 during the year under review ahead of the renewal of the
remuneration policy.
• 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. We are simplifying
our long-term incentives by ceasing to make matching awards of shares under the LTIP and so Executive Directors will only receive
awards of performance shares.
• 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 proposed Directors’ remuneration
policy is included on page 103. 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 long-term
incentive 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. Until
FY22 (inclusive) Executive Directors have been encouraged to invest their cash bonuses into shares and gain the potential benefit
of Matching Shares, subject to three-year performance targets being met. For FY23 (onwards) we are introducing a mandatory
share-based element to the pay-out of bonuses whereby one-third of any net bonus must be invested in shares which are held for a
minimum of three years, thus ensuring ongoing alignment with shareholder interests. Further, the business prides itself on a culture of
excellent customer service, which is reflected in the use of relevant performance metrics in the annual bonus scheme.
Governance
HomeServe plc Annual Report & Accounts 2022
108
Activities
The Committee met four times during the year. Details of meeting attendance are set out on page 72. The timing of meetings is
arranged around the annual remuneration cycle. The main areas of discussion are summarised below:
Items discussed
May 2021
November 2021
January 2022
March 2022
Policy
Review of the remuneration policy and shareholder consultation
●
Feedback from the shareholder consultation
●
Long-term incentives
Outturn for awards vesting in June 2021
●
Grant of awards including performance conditions
●
●
Bonus scheme
Performance conditions for the FY22 scheme
●
Potential outturn for FY22 scheme
●
Structure and performance conditions for FY23 scheme
●
●
Salaries
Salary increases for July 2021
●
Benchmarking for the CEO, North America
●
Broader workforce remuneration
Annual average salary increases
●
US LTIP approach for employees more broadly
●
●
Approach to subsidiary share plans
●
●
Advisers
The Committee selects its own advisers and received independent advice during FY22 from Korn Ferry. Korn Ferry was selected
to provide independent advice from November 2020 following a competitive tendering process. Korn Ferry is a member of the
Remuneration Consultants Group and is a signatory to its Code of Conduct. During the year, diversity and inclusion advice was
also provided to the Group by a separate team within Korn Ferry. The Committee does not consider that this prejudices Korn
Ferry’s position as the Committee’s independent advisers.
Fees charged by Korn Ferry for advice provided to the Committee for the year ended 31 March 2022 amounted to £108,972
(excluding VAT) on the basis of time charged to perform services and deliverables.
The Committee has also received assistance from Richard Harpin, Group Chief Executive, David Bower, Chief Financial Officer, and
Anna Maughan, Company Secretary, all of whom attended meetings of the Committee as required. No Executive Director took
part in discussions in respect of matters relating directly to their own remuneration.
Directors’ remuneration report continued
Annual report on remuneration continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
109
Single Total Figure of Remuneration (Audited)
Salary
and fees
Taxable
benefits 6
Pension 7
Bonus
LTIP 8 9
Other 10
Total
Fixed
Total
Variable
Total
Year
£000
£000
£000
£000
£000
£000
£000
£000
£000
Executives
D Bower
FY22
431
17
86
323
170
2
534
495
1,029
FY21
375
17
75
299
191
1
467
491
958
R Clemmow 2
FY22
400
17
25
300
–
–
442
300
742
FY21
12
–
–
–
–
–
12
–
12
R Harpin
FY22
597
22
119
448
280
2
738
730
1,468
FY21
588
23
118
469
343
1
729
813
1,542
T Rusin 1
FY22
512
18
9
338
246
2
539
586
1,125
FY21
508
16
8
405
297
1
532
703
1,235
Non-Executives
T Breen 3
FY22
350
–
–
–
–
–
350
–
350
FY21
62
–
–
–
–
–
62
–
62
K Cliffe
FY22
89
–
–
–
–
–
89
–
89
FY21
77
–
–
–
–
–
77
–
77
S David
FY22
77
–
–
–
–
–
77
–
77
FY21
68
–
–
–
–
–
68
–
68
R Donnelly 4
FY22
65
–
–
–
–
–
65
–
65
FY21
1
–
–
–
–
–
1
–
1
E Fitzmaurice
FY22
65
–
–
–
–
–
65
–
65
FY21
57
–
–
–
–
–
57
–
57
O Grémillon
FY22
65
–
–
–
–
–
65
–
65
FY21
57
–
–
–
–
–
57
–
57
J M B Gibson 5
FY22
39
–
–
–
–
–
39
–
39
FY21
300
–
–
–
–
–
300
–
300
R McMillan
FY22
77
–
–
–
–
–
77
–
77
FY21
68
–
–
–
–
–
68
–
68
Total FY22
2,767
74
239
1,409
696
6
3,080
2,111
5,191
Total FY21
2,173
56
201
1,173
831
3
2,430
2,007
4,437
1 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 FY22 of 1 GBP:1.36705 USD.
2 Ross Clemmow joined the Board on 22 March 2021.
3 Tommy Breen joined the Board on 27 January 2021.
4 Roisin Donnelly joined the Board on 25 March 2021.
5 JM Barry Gibson stepped down from the Board on 18 May 2021.
6 Benefits for UK-based Executive Directors comprise company car, fuel allowance and private health cover. Benefits for Tom Rusin comprise private health cover only.
7 Details of pension contributions can be found later in the report.
8 LTIP figures for FY21 have been updated to reflect the actual share price on vesting for the 2018 award. The figures for FY22 are based on the average share price over the last three months of the
financial year of £7.47 as the awards have not yet vested. The value shown for each LTIP award includes an estimated amount in respect of dividend equivalents.
9 Impact of share price change: The 2019 LTIP awards were granted on 26 June 2019 with a share price of £11.85. The impact of share price change for the 2019 LTIP awards, comparing share prices at
grant versus the average share price for the period 1 January to 31 March 2022 of £7.47, for each Executive Director is a decrease of £4.38 (37%) per share. This results in an estimated decrease in value
(including dividend equivalents) of: £99,487 for David Bower; £164,456 for Richard Harpin and £144,238 for Tom Rusin.
10 ‘Other’ relates to SIP matching shares awarded during the year.
Governance
HomeServe plc Annual Report & Accounts 2022
110
Details of variable pay earned in the year (Audited)
Annual Bonus
For FY22 the annual bonus was based on the following stretching targets:
Financial and non-financial bonus targets
Weighting
% Payable at
Threshold
Threshold
Maximum
Actual
% Payable
Financial
measures
Adjusted Group profit before tax
40%
10%
£215.0m
£220.0m
£220.3m
40%
Non-financial
measures
Customer growth
15%
3%
8,614k
8,819k
8,373k
0%
Trades growth (Checkatrade)
5%
2%
50.0k
59.4k
46.9k
0%
Trades growth (Habitissimo)
5%
2%
11.8k
13.1k
10.8k
0%
Customer dissatisfaction 1
3.7%
0.73%
5.0%
4.5%
4.5%
3.7%
Customer 5 star rating 1
11.3%
2.27%
4.64
4.68
4.74
11.3%
1 Customer dissatisfaction is measured as a weighted average across our UK and Spanish Membership businesses and the 5 star rating is measured as a weighted average across our North American,
French and Spanish Membership businesses. The 5 star rating element was introduced to the bonus scheme during the year under review as it was considered to represent a more rounded assessment
of customer satisfaction in selected key markets.
Personal bonus targets
Personal strategic objectives
Weighting
Outcome
% Payable
D Bower
• Review the operation of the Group
from an organisational perspective
and implement efficiencies and
improvements to support the
execution of business plans
• Simplify the various reward
structures within the Group,
recognising David’s role leading the
HR function.
20%
Key achievements included
• Corporate structure reviewed and changes
implemented to ensure that the legal structure reflects
the organisational structure.
• Changes agreed to the governance framework to ensure
timely and effective oversight of key priorities, improving
efficiency while maintaining appropriate controls.
• Group reward structures simplified and amended, with
US long-term incentive approach updated to include
restricted shares to ensure that the scheme remains
relevant to the local environment. LTIP to be used as
the key plan for all businesses, with a reduction in the
number of bespoke incentive schemes in operation.
20%
R Clemmow
• Establish a new plan to return the
UK Membership business to deliver
profit growth in FY23.
• Set out and prove out the winning
operating and marketing model for
HVAC which enables us to budget
for 7.5% marketing spend per local
HVAC business in FY23.
• Grow new international
opportunities.
20%
Key achievements included
• UK Membership stabilised customers at 1.5m and grew
profit to £72.9m in FY22.
• Good progress on HVAC marketing and operating
model, setting strong foundations for FY23.
• First HVAC business acquired in Germany and
discussions progressing in respect of other targets.
Japanese joint venture now has 4 group affinity
partnerships, with affinity households now at 14.1m
(ahead of target).
20%
R Harpin
• Implement Directory Extra
technology stack alongside proven
organisational model.
• Assist Tom Rusin to accelerate
growth in US and in particular, to
prove a new model to sign utility
partners quicker.
20%
Key achievements included
• Very good progress on Directory Extra model in
Checkatrade, with additional launches in Habitissimo
and in Maison in France.
• New way to introduce the US Membership business
to prospective partners pioneered and rolled out, with
promising initial results
20%
Directors’ remuneration report continued
Annual report on remuneration continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
111
Up to three personal strategic objectives
Weighting
Outcome
% Payable
T Rusin
Achieve the following metrics
in respect of North American
Membership:
• PBT between $154.1m and
$172.0m
• Customers between 5,022.5k and
5,227.5k
• New households between 6m
and 10m.
20%
Key achievements included
• North American adjusted operating profit of $159.1m
versus a budget of $163.0m, so in the performance
range
• Household signings of 7.2m
• Customer numbers unfortunately slightly below the
bottom end of the performance range.
11%
HomeServe had another successful year, financially and strategically. In line with our expectations, we delivered an acceleration in
our financial performance, with our key profit measure, adjusted profit before tax (PBTA) up 15% at £220.3m. We did not achieve our
stretching targets in respect of overall customer growth in our Membership businesses and trades growth in Home Experts, but it is
clear from the customer dissatisfaction and 5 star scores that our customers continue to be very happy with the service we provide. As
a result, 55% out of a maximum of 80% is payable in respect of Group performance.
Taking this into account and following an assessment of the personal performance of each Executive Director as set out above,
payments of between 66% and 75% of the maximum will be made.
The overall FY22 bonus opportunity and actual pay-outs achieved by each Executive Director as set out above, is set out below:
Maximum Opportunity
Actual pay-out
Name
£
% of salary
£
% of salary
D Bower
£431,250
100%
£323,438
75%
R Clemmow
£400,000
100%
£300,000
75%
R Harpin
£596,884
100%
£447,663
75%
T Rusin
£512,445
100%
£338,214
66%
Annual bonuses are paid in cash. Under the proposed remuneration policy, Executive Directors will have to invest one third of any net
bonus in shares. These shares will be subject to a three-year holding period.
Long-term Incentive Plan
The 2019 LTIP performance and matching awards were granted on 26 June 2019.
The performance conditions for the performance and matching awards were as follows:
Condition
Percentage of award to which
the condition applies
Performance period
Threshold target
Stretch target
Actual
performance
Vesting
TSR (underpinned by
underlying financial
performance)
25%
3 years to
31 March 2022
TSR equal to the
FTSE 250 index
TSR exceeds
the index by an
average of 15% p.a.
-16.1%
0%
EPS
75%
3 years to
31 March 2022
Compound
annual growth
of 9%
Compound annual
growth of 15%
9.54%
31.9%
Based on the level of performance as set out in the table above, the overall level of vesting is expected to be 23.93%. A two-year post-
vesting holding requirement applies to the awards.
The 2019 awards have been valued for the purpose of the remuneration table on page 109 using the average share price over the last
three months of the financial year (£7.47 per share).
Governance
HomeServe plc Annual Report & Accounts 2022
112
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 2022
Awarded during year
Lapsed during year
Vested during year
31 March 2021
Date granted
Type of award
D Bower
—
—
36,845
9,402
46,247
24.7.18
Performance
—
—
35,945
9,172
45,117
24.7.18
Matching
47,468
—
—
—
47,468
26.6.19
Performance
40,789
—
—
—
40,789
26.6.19
Matching
42,485
—
—
—
42,485
15.7.20
Performance
41,985
—
—
—
41,985
15.7.20
Matching
86,789
86,789
—
—
—
23.6.21
Performance
57,570
57,570
—
—
—
23.6.21
Matching
R Clemmow
77,146
77,146
—
—
—
23.6.21
Performance
72,324
72,324
—
—
—
23.6.21
Buy Out
R Harpin
—
—
69,419
17,714
87,133
24.7.18
Performance
—
—
67,474
17,217
84,691
24.7.18
Matching
74,438
—
—
—
74,438
26.6.19
Performance
71,453
—
—
—
71,453
26.6.19
Matching
66,623
—
—
—
66,623
15.7.20
Performance
65,842
—
—
—
65,842
15.7.20
Matching
115,684
115,684
—
—
—
23.6.21
Performance
90,279
90,279
—
—
—
23.6.21
Matching
T Rusin
—
—
59,513
15,186
74,699
24.7.18
Performance
—
—
53,532
13,660
67,192
24.7.18
Matching
65,926
—
—
—
65,926
26.6.19
Performance
62,030
—
—
—
62,030
26.6.19
Matching
59,666
—
—
—
59,666
15.7.20
Performance
59,475
—
—
—
59,475
15.7.20
Matching
94,496
94,496
—
—
—
23.6.21
Performance
72,075
72,075
—
—
—
23.6.21
Matching
Directors’ remuneration report continued
Annual report on remuneration continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
113
Further details on LTIP awards granted during the financial year
On 23 June 2021, the following performance and matching share awards were granted to the Executive Directors under the LTIP:
Performance share awards
Date of grant
Number of shares
Share price used to
determine awards
Award size
(% salary)
Face value at
grant £
% that vests at threshold
D Bower
23.6.21
86,789
£10.37
200%
£900,002
18.75%
R Clemmow
23.6.21
77,146
£10.37
200%
£800,004
18.75%
R Harpin
23.6.21
115,684
£10.37
200%
£1,199,643
18.75%
T Rusin
23.6.21
94,496
£10.37
200%
£979,924
18.75%
No consideration was payable for the grant of the Awards. Performance Awards will vest in three years’ time subject to continued
employment and the achievement of stretching performance criteria relating to EPS. The extent to which Performance Awards vest at
the end of the Performance Period will be determined as follows:
Compound Annual Growth in EPS over the Performance Period
Percentage of Award that Vests
Less than 7%
0%
7%
18.75%
Between 7% and 13%
On a straight-line basis between 18.75% and 75%
13%
75%
Over 13% and up to 16%
On a straight-line basis between 75% and 100%
The Performance Period is the period of three financial years ending on 31 March 2024. Vesting is also subject to underlying financial
performance and a two year post vesting holding period applies.
Matching share awards
Date of grant
Number of
investment shares
purchased
Award size
Number of
shares subject to
matching award
Share price used
to determine
awards
Face value £
% that vests at
threshold
D Bower
23.6.21
15,256
2:1 match
57,570
£9.687
£557,681
25%
R Harpin
23.6.21
23,924
2:1 match
90,279
£9.687
£874,533
25%
T Rusin
23.6.21
19,100
2:1 match
72,075
£9.687
£698,191
25%
No consideration was paid for the grant of Matching Awards (other than the acquisition of linked Investment Shares). Subject to the
retention of the Investment Shares, continued employment and the achievement of stretching comparative TSR related performance
criteria, the Matching Awards will vest after three years.
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 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
0%
Equal to the TSR of the median company in the Peer Group
25%
Equal to or more than the TSR of the company at the 75th
percentile of the Peer Group
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 2024.
Governance
HomeServe plc Annual Report & Accounts 2022
114
Individual Award under Listing Rule 9.4.2 (2)
As explained last year, a one-off award was made to buy out Ross Clemmow’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 Ross Clemmow’s
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 and the number of shares awarded
was 72,324 (based on the closing mid-market price of the Company’s shares on 17 May 2021 of £10.37). The date of grant was 23 June
2021. The award is not pensionable.
The share award is fully performance-related and the extent to which the shares vest at the end of the Performance Period will be
determined as follows:
Compound Annual Growth in EPS over the Performance Period
Percentage of Shares that Vests
Less than 7%
0%
7%
25%
Between 7% and 13%
On a straight-line basis between 25% and 100%
13% or more
100%
The Performance Period is the period of three Financial Years ending on 31 March 2024. Any shares which vest are subject to a two-
year post-vesting holding period (excluding any shares which are required to be sold to pay tax on vesting).
Further details on awards vested during the financial year - Audited
Performance and matching awards granted on 24 July 2018 vested at 20.33% during the year.
Date of grant
Type of Award
Date of exercise
No of Shares
Share price at
exercise
Face value
at exercise
Dividend equivalents
paid in cash
D Bower
24.7.18
Performance
26.7.21
9,402
£9.575
£90,024
£6,675
24.7.18
Matching
26.7.21
9,172
£9.575
£87,822
£6,512
R Harpin
24.7.18
Performance
29.11.21
17,714
£9.110
£161,375
£12,577
24.7.18
Matching
29.11.21
17,217
£9.110
£156,847
£12,224
T Rusin
24.7.18
Performance
26.7.21
15,186
£9.575
£145,409
£10,782
24.7.18
Matching
26.7.21
13,660
£9.575
£130,796
£9,699
One Plan Matching Shares (Share Incentive Plan)
All employees are eligible to participate in One Plan. Participants receive one Matching Share for every Partnership Share they purchase.
Shares are purchased monthly. Matching Shares are normally kept in trust for a minimum period of three years.
31 March 2022
Sold during the year to
pay tax on vesting
Acquired during year
31 March 2021
Aggregate face value of shares
awarded during the year 1
D Bower
671
—
206
465
£1,798
R Clemmow
62
—
62
—
£449
R Harpin
671
—
206
465
£1,798
T Rusin
598
38
215
421
£1,869
1 Based on the acquisition price of the associated Partnership Shares. The highest share price was £11.42 and the lowest share price was £6.65. Ross Clemmow joined the Plan in January 2022.
Payments for loss of office and payments to past Directors - Audited
No payments were made during the year for loss of office or to past Directors.
Directors’ remuneration report continued
Annual report on remuneration continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
115
Shareholding Guidelines - Audited
It is the Board’s policy that Executive Directors and Non-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 financial year, together with those of their families, in the shares
of the Company are set out below, as at 31 March 2022. Further SIP Partnership shares have since been purchased in each of April
and May 2022 on behalf of the Executive Directors together with the allocation of a corresponding number of matching shares.
Beneficial interests have therefore increased further by 62 shares for each of D Bower and R Harpin, 60 shares for R Clemmow,
68 shares for T Rusin.
31 March 2021
31 March 2022
Value of Shares held as a
multiple of current salary/fee¹
Guideline met?
Outstanding LTIP awards
(2019,2020 & 2021)2
D Bower
167,338
192,896
361%
Yes
317,086
R Clemmow
—
124
0.26%
No
149,470
R Harpin
40,790,004
24,825,697
34,890%
Yes
484,319
T Rusin
841,725
873,794
1,291%
Yes
413,668
T Breen
—
100,000
241%
No
—
K Cliffe
20,976
20,976
199%
No
—
S David
100,020
100,020
1,095%
Yes
—
R Donnelly
—
5,000
65%
No
—
E Fitzmaurice
786,265
786,265
10,197%
Yes
—
O Grémillon
15,600
18,600
241%
No
—
R McMillan
17,999
17,999
197%
No
—
¹ Calculated using the shareholding and share price on 31 March 2022 of £8.43 divided by the Executive’s salary or Non Executive’s fee on that date.
2 Outstanding LTIP awards include both Performance and Matching share awards made in 2019, 2020 and 2021 and are subject to meeting performance conditions at vesting in 2022, 2023 and 2024
respectively.
Directors’ pensions (Audited)
The following contributions were made:
2022
£000
2021
£000
D Bower
86
75
R Clemmow
25
—
R Harpin
119
118
Tom Rusin participates in a US 401k pension plan (a defined contribution scheme) to which the Company contributed £9,219 ($12,603)
in FY22. (FY21: £8,639).
Governance
HomeServe plc Annual Report & Accounts 2022
116
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 2022. This comparator has been chosen as it is a broad equity index of which the
Company is currently a constituent.
Total Shareholder Return
Source: Refinitiv Eikon Datastream
The graph shows the value, by 31 March 2022, of £100 invested in HomeServe plc on 31 March 2012 compared with that of £100 invested in the FTSE-250 Index on the same date.
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:
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Total remuneration (£000s)
953
1,212
1,200
3,355
4,256
8,563 1
4,749
4,237
1,542 2
1,468
Annual Bonus
75%
100%
96%
98%
100%
96%
75%
92%
79.7%
75%
LTIP awards vesting
0%
0%
0%
100%
100%
100%
100%
100%
20.33%
23.93%
Notes:
1 The total includes the 2014 and 2015 LTIP awards which were granted and vested a year apart.
2 FY21 remuneration has been restated to reflect actual share price on vesting of the 2018 LTIP award.
Directors’ remuneration report continued
Annual report on remuneration continued
FTSE-250 index
HomeServe plc
300
350
400
450
500
550
250
200
100
150
50
0
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
31 March 22
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
117
Percentage change in remuneration levels
The table below shows the year-on-year percentage change in each Director’s remuneration (excluding the value of any pension,
matching awards and performance awards receivable in the year) compared to the average for all employees of HomeServe plc.
% Change from FY21 to FY22
% Change from FY20 to FY21
Salary
Benefits
Annual Bonus
Salary
Benefits
Annual Bonus
D Bower
15%
2%
8%
0%
(6%)
(16%)
R Clemmow 1
n/a
n/a
n/a
n/a
n/a
n/a
R Harpin
2%
(2%)
(4%)
1%
(19%)
(13%)
T Rusin
6%
19%
(13%)
1%
(6%)
(10%)
T Breen 2
n/a
n/a
n/a
n/a
n/a
n/a
K Cliffe
16%
n/a
n/a
13%
n/a
n/a
S David
13%
n/a
n/a
(3%)
n/a
n/a
R Donnelly 3
n/a
n/a
n/a
n/a
n/a
n/a
E Fitzmaurice
13%
n/a
n/a
5%
n/a
n/a
O Grémillon
13%
n/a
n/a
5%
n/a
n/a
R McMillan
13%
n/a
n/a
5%
n/a
n/a
Average of other
HomeServe plc employees
5%
21%
(39%)
5%
2%
34%
1 Ross Clemmow joined the Board on 22 March 2021
2 Tommy Breen joined the Board on 27 January 2021
3 Roisin Donnelly joined the Board on 25 March 2021
CEO pay ratio
The table below compares the Chief Executive’s total remuneration against that for the lower quartile, median and upper quartile UK
employees (calculated on a full-time equivalent basis).
Year
Method
25th Percentile pay ratio
Median pay ratio
75th percentile pay ratio
FY22
Option B
62:1
37:1
33:1
FY21
Option B
70:1
52:1
43:1
FY20
Option B
203:1
126:1
91:1
In terms of reporting options, the Company has chosen option B, using the most recent gender pay gap information to determine
the relevant employee at each of the 25th, 50th and 75th percentiles. This option has been chosen, as the data is considered to be the
most accurate and comprehensive data available and will be repeatable on a sustained basis. For example, therefore, gender pay gap
data at 1 April 2021 has been used to identify the relevant employees for FY22. Actual pay and benefits data received by the relevant
employees for FY22 has then been used for the comparison to the Chief Executive’s pay and calculate the respective pay ratios. Where
appropriate an estimate has been used for FY22 bonus pay-out.
The total pay and benefits figures and the salary component of total pay and benefits for this year is set out below.
Pay data FY22
Base Salary
Total Pay & benefits
CEO remuneration
£596,884
£1,467,623
25th percentile employee
£21,559
£23,509
50th percentile employee
£32,500
£39,556
75th percentile employee
£37,425
£44,773
Governance
HomeServe plc Annual Report & Accounts 2022
118
This year, our CEO pay ratio has reduced to 37:1. Whilst for the CEO remuneration variable pay is broadly similar (annual bonus
75%, LTIP 23.93% versus last year 79.7% and 20.33% respectively), the total pay and benefits received by the selected employees has
increased versus last year.
Total pay and benefits comparing FY22 relevant employees with FY21 relevant employees shows increases of 2%, 29% and 21% at
the 25th, 50th and 75th percentiles respectively. There have been no significant changes to reward arrangements to explain these
increases and the change is therefore attributed to the reward received by the selected employees using Option B methodology.
The employees identified are reasonably representative of the nature of our workforce being identified from customer support,
business support and field engineer areas.
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 data FY22
FY21
£m
FY22
£m
% change
Pay (£m)
389.1
414.1
6%
Dividends (£m)
80.5
89.3
11%
Tax (£m)
15.4
41.7
171%
Retained profits (£m)
31.1
132.8
327%
Application of the remuneration policy to be implemented for FY23
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, although the Committee has the ability to take a different approach if
circumstances require. The explanation for the salary decisions for FY23 is in the Annual Statement of the Chair of the Remuneration
Committee on page 94.
The salaries for the Executive Directors from 1 July 2022 will be as follows:
2022
£000
D Bower
£463,500
R Clemmow
£412,000
R Harpin
£617,819
T Rusin
$780,000
As explained on page 94, Tom Rusin’s salary is not increasing for FY23 as he received a special salary increase during FY22.
Directors’ remuneration report continued
Annual report on remuneration continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
119
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 last reviewed during FY21, as explained in last year’s report. There are no changes to the fee
levels from July 2022.
Details of the current and previous fees are detailed in the table below.
1 July 2021
1 July 2022
Chairman's fees
£350,000
£350,000
Non-Executive Directors' base fee
£65,000
£65,000
Senior Independent Director additional fee
£12,000
£12,000
Chair of Remuneration, Audit & Risk or People Committee
£12,000
£12,000
Annual bonus performance targets FY23
The annual bonus plan for FY23 will operate in line with the new Directors’ remuneration policy. The maximum bonus opportunity for
each Director will be 150% of basic salary, with half of this amount payable for on-target performance. One-third of any bonus must be
invested in HomeServe shares, to be held for a minimum of three years.
The bonus measures will be as follows for Richard Harpin and David Bower:
Financial measures
(60% of bonus)
Non financial measures
(20% of bonus)
ESG
(10% of bonus)
Personal objectives
(10% of bonus)
• Profit before tax
• Customer growth (5%)
• Trades growth (Checkatrade) (5%)
• Reduction in customer
dissatisfaction (10%)
• Environment strategy
• Up to three personal
strategic objectives
The bonus measures will be as follows for Ross Clemmow and Tom Rusin:
Financial measures
(60% of bonus)
Non financial measures
(20% of bonus)
ESG
(10% of bonus)
Personal objectives
(10% of bonus)
• Group Profit before tax
(30%)
• Divisional Profit before
tax (30%)
• Divisional Customer growth (10%)
• Reduction in Divisional Customer
dissatisfaction (10%)
• Environment strategy
• Up to three personal
strategic objectives
The Committee considers the forward-looking performance targets to be commercially sensitive and 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.
Governance
HomeServe plc Annual Report & Accounts 2022
120
Long-term incentives
Subject to the approval of the new Remuneration Policy, Performance Awards of 250% of salary will be made to the Executive
Directors. An additional Performance Award equating to 100% of salary will be made to Tom Rusin. Further details are provided on
page 93.
Performance criteria
The performance targets to be applied to the awards granted in FY23 are as follows for all standard awards:
• EPS growth (33.3%)
• Relative TSR (33.3%)
• ROIC (33.3%).
The additional award for Tom Rusin will be based on profit growth (50%) and ROIC (50%) for the US Membership division.
Due to the ongoing discussions with Brookfield, the detailed targets are still under consideration and will be confirmed if and when
awards are granted.
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 last year’s Annual General Meeting held on 16 July 2021, the following votes from shareholders were received in respect of the
Remuneration report. Also shown are the votes received when the policy was last considered in 2020.
Remuneration report
(2021 AGM)
Remuneration policy
(2020 AGM)
Total number of votes
% of votes cast
Total number of votes
% of votes cast
For
225,955,951
90.3
226,075,370
95.7
Against
24,176,835
9.7
10,179,917
4.3
Total votes cast (for and against excluding withheld votes)
250,132,786
100.0
236,255,287
100.0
Votes withheld
4,668,300
5,760,270
Total votes (including withheld votes)
254,801,086
242,015,557
By Order of the Board
Katrina Cliffe
Chair of the Remuneration Committee
24 May 2022
Directors’ remuneration report continued
Annual report on remuneration continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
121
The Directors have pleasure in presenting their Annual Report for the year ended 31 March 2022.
Management report
The Directors’ report, together with the Strategic report set out on pages 2 to 59 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 59.
Employees (employment of disabled persons, employee engagement and policies)
Pages 23 to 25.
Greenhouse gas emissions and SECR
Pages 28 to 31.
Stakeholder engagement
Pages 20 to 21.
Corporate Governance Statement
Pages 61 to 91.
Directors’ details (including changes made during the year)
Pages 69, 74 to 75.
Related party transactions
Note 34 on page 194.
Diversity
Page 25.
Share Capital
Note 28 on page 185.
Going Concern and Viability Statement
Pages 58 and 59.
Employee share schemes (including long-term incentive schemes)
Note 32 on page 188 and 189.
Financial instruments: Information on the Group’s financial instruments and risk
management objectives and policies, including our policy for hedging
Notes 27 and 46 on pages
182 to 185 and 207 to 209.
Statements of responsibilities
Page 124.
Disclosure of information to auditor
Page 124.
Post balance sheet events
Note 35 on page 195.
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
Disclosure
9.8.4(1)
Interest capitalised by the Group and any related tax relief
Not applicable
9.8.4(2)
Unaudited financial information (LR 9.2.18 R)
Strategic report page 2 to 59.
9.8.4(4)
Long-term incentive schemes (LR 9.4.3 R)
Directors’ remuneration report
pages 111 to 114.
9.8.4(5)
Directors’ waivers of emoluments
Not applicable
9.8.4(6)
Directors’ waivers of future emoluments
Not applicable
9.8.4(7)
Non pre-emptive issues of equity for cash
Not applicable
9.8.4(8)
Non pre-emptive issues for cash by any unlisted major subsidiary undertaking
Not applicable
9.8.4(9)
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
Directors’ report on page 122.
9.8.4(13)
Waiver of future dividends by a shareholder
Directors’ report on page 122.
9.8.4(14)
Board statement in respect of relationship agreement with the controlling
shareholder
Not applicable
Directors’ report
Governance
HomeServe plc Annual Report & Accounts 2022
122
Dividends
In light of the recommended cash offer for the Group announced on 19 May 2022, the Board is not recommending a final dividend.
The total dividend for the year therefore consists of the interim dividend of 6.8p per share which was paid on 7 January 2022 (FY21:
26.0p).
Political donations
No political donations were made during the year.
Rules on appointment and replacement of Directors
All of the Directors will seek 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 2021 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 2022 AGM.
Authority to purchase shares
The Company was authorised at the 2021 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 2022 AGM. No shares were purchased during the year and no shares are
held in Treasury.
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.
Directors’ report continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
123
Annual General Meeting
The 2022 Annual General Meeting of the Company will be held on 22 July 2022.
Fixed Assets
Capital expenditure on tangible fixed assets amounted to £6.8m (FY21: £7.1m) 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 24 May 2022 are set out
in the Remuneration report on page 115. 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 24 May 2022, except for the following:
As at 31 March 2022
As at 24 May 2021
Name
ordinary shares
%
ordinary shares
%
R Harpin
24,825,697
7.38
24,825,759
7.38
BlackRock Inc
18,280,853
5.43
18,983,803
5.64
T Rowe Price Associates Inc
16,769,101
4.98
16,769,101
4.98
K Harpin
16,025,620
4.76
16,025,620
4.76
Bank of America Corporation
—
—
13,371,027
3.97
Taxation status
The Company is not a close company within the meaning of the Income and Corporation Taxes Act 1988.
Post balance sheet event
On 19 May 2022, Brookfield Infrastructure Funds announced a recommended cash offer for the entire issued and to be issued share
capital of the Company, to be effected by means of a court approved scheme of arrangement under Part 26 of the UK Companies Act
2006. The proposed acquisition is subject to shareholder approval, approval of the courts and approval from a number of regulatory
authorities.
By Order of the Board
Anna Maughan
Company Secretary
24 May 2022
Governance
HomeServe plc Annual Report & Accounts 2022
124
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 in accordance with United Kingdom adopted international accounting
standards. The Directors have also chosen to prepare the parent Company financial statements under United Kingdom adopted
international accounting standards. Under company law the Directors must not approve the financial statements 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, International Accounting Standard 1 requires that Directors:
• 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 of the financial reporting framework 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; and
• make an assessment of the Company’s ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and 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.
Responsibility Statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the relevant financial reporting framework, 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 Strategic report includes 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; and
• the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the company’s position and performance, business model and strategy.
By Order of the Board
Richard Harpin
David Bower
Chief Executive Officer
Chief Financial Officer
24 May 2022
24 May 2022
Statements of responsibilities
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
125
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 2022 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting
standards;
• the parent company financial statements have been properly prepared in accordance with United Kingdom adopted international
accounting standards and as applied in accordance with the provisions 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 their preparation is applicable law and United Kingdom adopted international
accounting standards and, as regards the parent company financial statements, as applied in accordance with the provisions 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 we have not
provided any non-audit services prohibited by the FRC’s Ethical Standard 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;
• 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
Governance
HomeServe plc Annual Report & Accounts 2022
126
Materiality
The materiality that we used for the Group financial statements was £8.6m which was determined on the basis of 0.6% of revenue.
Scoping
The significant businesses in 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.
Significant changes in our approach
In the prior year we identified the impairment of the UK’s eServe Customer Relationship Management (‘eServe’) to be a key audit
matter. Management fully impaired the new eServe system in the prior year, resulting in impairment charges of £82.6m being
incurred by the Group. Following management’s impairment review and the decision to fully impair the eServe system, this area has
not been identified as a key audit matter for the year ended 31 March 2022.
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 continuing impact of the
Covid-19 pandemic and the Group’s operational resilience, and the announcement on 24 March 2022 that a third party was
considering a bid for HomeServe, 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.
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.
Independent Auditor’s report
to the members of HomeServe plc continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
127
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 £667.9m (FY21: £564.3m).
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-19 pandemic, Habitissimo is currently loss making and the value in use
assessment is highly sensitive to variations in the short-term cash flow growth assumptions.
Given the degree of judgement and estimation involved in assessing the carrying value of goodwill, we also identified that there is a
potential for fraud through possible manipulation of this balance.
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 Habitissimo CGU could result in an impairment of goodwill, which has a
carrying value of £12.4m.
Further detail on the key judgements involved is set out within the Audit and Risk Committee report on page 88, 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 with support from our internal valuations specialists. We assessed the impact of using our independent
WACC rate in management’s impairment calculation. 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 Habitissimo and Checkatrade, given the businesses have low levels of forecast profitability in the short-term.
This included understanding the key drivers of growth and challenging the extension of the estimated future cash flows for the
Habitissimo CGU to cover a five-year period; and
• assessing the Group’s ability to accurately forecast business performance with reference to historical trading performance.
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 sensitivity of the
carrying value of goodwill in the Habitissimo CGU, in line with guidance from IAS 36 – Impairment of assets and IAS 1 – Presentation of
financial statements.
Governance
HomeServe plc Annual Report & Accounts 2022
128
Key observations
Overall, we concluded that the 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 2022. We
consider the disclosures in note 3 and 13 in relation to Habitissimo to be appropriate in highlighting that a reasonably plausible
change in operational cash flows in that CGU could result in an impairment of goodwill.
Revenue deferrals
Key audit matter description
As an insurance intermediary, the Group 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. This 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 2022 in respect of the Group’s future claim handling obligations is £17.9m (FY21:
£18.9m). The total amount of revenue deferred at 31 March 2022 in respect of the Group’s directly employed operations is £23.8m
(FY21: £21.8m).
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 88,
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 continued Covid-19 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 and challenged any variances;
• We have inspected Management’s DEE rate calculations, based on previous claims data, and tested all the underlying inputs for
completeness and accuracy; and
• For claims profiles we tested a sample of policies and agreed underwriter rates to third party information.
We tested the completeness and accuracy of 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.
Independent Auditor’s report
to the members of HomeServe plc continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
129
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
£8.6m (FY21: £7.4m)
£4.3m (FY21: £3.7m)
Basis for
determining
materiality
We determined materiality for the Group on the basis of 0.6%
of revenue (FY21: less than 0.6% of revenue).
We determined parent company materiality on
the basis of net assets, capped at 50% of Group
materiality. Parent company materiality equates to
0.9% (FY21: 0.8%) of net assets.
Rationale for
the benchmark
applied
Consistent with the prior year, we consider revenue to be
the most stable materiality benchmark on the basis it is less
susceptible to business seasonality. We also note revenue is
considered a key metric for users of the financial statements.
The Company is the parent company for the
Group and is not a trading entity, hence we
considered this net assets to be the most
appropriate measure for the Company.
Revenue
Group materiality
Group materiality £8.6m
Component materiality range
£3.0m to £4.8m
Audit & Risk Committee reporting
threshold £0.43m
Revenue
£1,429.3m
Governance
HomeServe plc Annual Report & Accounts 2022
130
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.
Group financial statements
Parent company financial statements
Performance
materiality
70% (FY21: 70%) of Group materiality
70% (FY21: 70%) of parent company materiality
Basis and
rationale for
determining
performance
materiality
In determining performance materiality, we considered the following factors:
• 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-19 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 £430,000
(FY21: £367,500), 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 significant businesses in 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.
The operating segments subject to a full scope audit account for 99% (FY21: 99%) of the Group’s revenue and 100% (FY21: 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 £3.0m to £4.8m (FY21: £2.6m to £3.6m).
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.
Independent Auditor’s report
to the members of HomeServe plc continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
131
Our consideration of the control environment
We planned to rely on revenue controls in our audit of the membership businesses in the UK, North America, France and Spain. In
doing so we obtained an understanding and tested the relevant controls. The Group is reliant upon the effectiveness of a number of
IT applications and controls to ensure that transactions are processed and recorded completely and accurately and we involved our IT
specialists to obtain an understanding of general IT controls across the systems relevant to the businesses listed.
With the exception of North America and France membership businesses, we relied upon the controls tested as planned. In relation
to these membership businesses we identified control deficiencies over the related IT systems. As a result of these findings, we
reconsidered our risk assessment and conducted additional substantive procedures including increased sample testing of the
membership revenue balances. We therefore adopted a fully substantive approach in relation to these areas in our audit testing.
Our consideration of climate-related risks
In planning our audit, we have considered the impact of climate change on the Group’s operations and impact on its financial
statements. The Group has set out its carbon reduction ambitions and further information on page 31 of the Strategic Report. We have
held discussions with the Group to understand:
• the process for identifying affected operations, including the governance and controls over this process, and the subsequent effect
on the financial reporting for the Group; and
• the long-term strategy to respond to climate change risks as they evolve.
Our audit work has involved challenging the completeness of the physical and transition risks identified and considered in the Group’s
climate risk assessment and the conclusion that there is no material impact of climate change risk on current year financial reporting, as
disclosed in note 3 on page 154.
As part of our audit procedures we are required to read these disclosures to consider whether they are materially inconsistent with
the financial statements or knowledge obtained in the audit and we did not identify any material inconsistencies as a result of these
procedures. We have not been engaged to provide assurance over the accuracy of climate change disclosures.
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-19 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 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.
Governance
HomeServe plc Annual Report & Accounts 2022
132
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.
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 the carrying value of goodwill and 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 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.
Independent Auditor’s report
to the members of HomeServe plc continued
HomeServe plc Annual Report & Accounts 2022
133
Strategic report
Governance
Financial statements
Other information
Audit response to risks identified
As a result of performing the above, we identified the carrying value of goodwill and revenue deferrals as key audit matters related to the
potential risk of fraud. The key audit matters section of our report explains these matters in more detail and also describes the specific
procedures we performed in response to those key audit matters.
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
• 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
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’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 59;
• 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 58;
• the Directors’ statement on fair, balanced and understandable set out on page 89;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 89;
• the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out
on page 84 to 85; and
• the section describing the work of the Audit and Risk Committee set out on page 87.
Governance
HomeServe plc Annual Report & Accounts 2022
134
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.
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 20 years, covering the years ending 31 March 2003 to 31
March 2022.
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.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these financial
statements form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National
Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report
provides no assurance over whether the annual financial report has been prepared using the single electronic format specified in the
ESEF RTS. We have provided assurance on whether the annual financial report has been prepared using the single electronic format
specified in the ESEF RTS and have reported separately to the members on this.
Peter Birch FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Leeds, UK
24 May 2022
Independent Auditor’s report
to the members of HomeServe plc continued
HomeServe plc Annual Report & Accounts 2022
135
Strategic report
Governance
Financial statements
Other information
To the Members of HomeServe plc
Report on compliance with the requirements for iXBRL mark up (‘tagging’) of consolidated financial statements included in the
ESEF-prepared Annual Financial Report
We have undertaken a reasonable assurance engagement on the iXBRL mark up of consolidated financial statements for the year ended
31 March 2022 of HomeServe plc (the “company”) included in the ESEF-prepared Annual Financial Report prepared by the company.
Opinion
In our opinion, the consolidated financial statements for the year ended 31 March 2022 of the company included in the ESEF-prepared
Annual Financial Report, are marked up, in all material respects, in compliance with the ESEF RTS.
The directors’ responsibility for the ESEF-prepared Annual Financial Report prepared in compliance with the ESEF RTS
The directors are responsible for preparing the ESEF-prepared Annual Financial Report. This responsibility includes:
• the selection and application of appropriate iXBRL tags using judgement where necessary;
• ensuring consistency between digitised information and the consolidated financial statements presented in human-readable format;
and
• the design, implementation and maintenance of internal control relevant to the application of the ESEF RTS.
Our independence and quality control
We have complied with the independence and other ethical requirements of 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.
We apply International Standard on Quality Control 1 and, accordingly, maintain a comprehensive system of quality control including
documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and
regulatory requirements.
Our responsibility
Our responsibility is to express an opinion on whether the electronic mark up of consolidated financial statements complies in all
material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in
accordance with International Standard on Assurance Engagements (UK) 3000, Assurance Engagements Other than Audits or Reviews
of Historical Financial Information (‘ISAE (UK) 3000’) issued by the FRC.
A reasonable assurance engagement in accordance with ISAE (UK) 3000 involves performing procedures to obtain reasonable
assurance about the compliance of the mark up of the consolidated financial statements with the ESEF RTS. The nature, timing and
extent of procedures selected depend on the practitioner’s judgement, including the assessment of the risks of material departures from
the requirements set out in the ESEF RTS, whether due to fraud or error. Our reasonable assurance engagement consisted primarily of:
• obtaining an understanding of the ESEF RTS mark up process, including internal control over the mark up process relevant to the
engagement;
• reconciling the marked up data with the audited consolidated financial statements of the company dated 31 March 2022;
• evaluating the appropriateness of the company’s mark up of the consolidated financial statements;
• evaluating the appropriateness of the company’s use of iXBRL elements selected from a permitted taxonomy and the creation of
extension elements where no suitable element in the permitted taxonomy has been identified; and
• evaluating the use of anchoring in relation to the extension elements.
In this report we do not express an audit opinion, review conclusion or any other assurance conclusion on the consolidated financial
statements. Our audit opinion relating to the consolidated financial statements of the company for the year ended 31 March 2022 is set
out in our Independent Auditor’s Report dated 24 May 2022.
Independent auditor’s reasonable assurance report on the compliance of HomeServe plc’s
European Single Electronic Format (ESEF) prepared Annual Financial Report with the European
Single Electronic Format Regulatory Technical Standard (‘ESEF RTS’) as required by the Financial
Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R
Governance
HomeServe plc Annual Report & Accounts 2022
136
Independent auditor’s reasonable assurance report on the compliance of HomeServe plc’s
European Single Electronic Format (ESEF) prepared Annual Financial Report with the European
Single Electronic Format Regulatory Technical Standard (‘ESEF RTS’) as required by the Financial
Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R continued
Use of our report
Our report is made solely to the company’s members, as a body, in accordance with ISAE (UK) 3000. Our work has been undertaken
so that we might state to the company those matters we are required to state to them in this 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 work, this report, or for the conclusions we have formed.
Peter Birch FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Leeds, UK
24 May 2022
Strategic report
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
137
Contents
Financial statements
138 Group financial statements
196 Company financial statements
Other information
217 Glossary
224 Shareholder information
Governance
Financial statements
Other information
“The biggest benefit of being on
Checkatrade for us is that we do not
need a sales team. Checkatrade alone
brings us enough work in to employ
me and 13 staff with 5 vehicles.”
Lee Austin
All Roofs UK
Financial statements
HomeServe plc Annual Report & Accounts 2022
138
Notes
2022
£m
2021
£m
Continuing operations
Revenue
4
1,429.3
1,304.7
Operating costs
5
(1,223.3)
(1,230.4)
Share of results of equity accounted investments
18
(3.4)
(2.5)
Operating profit
202.6
71.8
Investment income
8
0.3
0.4
Finance costs
9
(27.8)
(25.0)
Adjusted profit before tax
220.3
191.3
Amortisation of acquisition intangibles
5
(44.9)
(45.0)
Certain transaction related costs
7
(0.3)
(6.7)
Exceptional items
7
—
(92.4)
Profit before tax
175.1
47.2
Tax
10
(41.7)
(15.4)
Profit for the year
133.4
31.8
Attributable to:
Equity holders of the parent
132.8
31.1
Non-controlling interests
0.6
0.7
133.4
31.8
Dividends per share, paid and proposed
11
6.8p
26.0p
Earnings per share
Basic
12
39.5p
9.3p
Diluted
12
39.3p
9.2p
Group income statement
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
139
Notes
2022
£m
2021
£m
Profit for the year
133.4
31.8
Items that will not be reclassified subsequently to profit and loss:
Re-measurement gain/(loss) on defined benefit pension schemes
33
3.7
(4.5)
Deferred tax (charge)/credit relating to re-measurements
10
(0.9)
0.9
Fair value (loss)/gain on "fair value through other comprehensive income" (FVTOCI)
investments in equity instruments
17
(0.1)
4.6
Deferred tax charge relating to fair value movements on FVTOCI
investments in equity instruments
10
—
(1.3)
2.7
(0.3)
Items that may be reclassified subsequently to profit and loss:
Exchange movements on translation of foreign operations
7.1
(26.4)
Exchange movements on non-controlling interests
0.3
(1.1)
7.4
(27.5)
Total other comprehensive income/(expense)
10.1
(27.8)
Total comprehensive income for the year
143.5
4.0
Attributable to:
Equity holders of the parent
142.6
4.4
Non-controlling interests
0.9
(0.4)
143.5
4.0
Group statement of comprehensive income
Year ended 31 March 2022
Financial statements
HomeServe plc Annual Report & Accounts 2022
140
Notes
2022
£m
2021
£m
Non-current assets
Goodwill
13
667.9
564.3
Other intangible assets and prepaid software
14
424.1
391.3
Contract costs
4
4.1
8.2
Right-of-use assets
26
48.3
48.6
Property, plant and equipment
15
40.4
41.7
Equity accounted investments
18
1.3
0.8
Other investments
17
14.3
12.9
Other financial assets
27
1.5
1.2
Deferred tax assets
10
2.3
12.8
Retirement benefit assets
33
14.3
8.3
1,218.5
1,090.1
Current assets
Inventories
19
20.4
12.2
Trade and other receivables
20
549.6
501.0
Other financial assets
27
0.9
—
Current tax assets
0.7
2.5
Cash and cash equivalents
21
174.5
171.4
746.1
687.1
Total assets
1,964.6
1,777.2
Current liabilities
Trade and other payables
22
(447.4)
(454.9)
Bank and other loans
25
(100.9)
(54.0)
Current tax liabilities
(5.7)
(9.2)
Lease liabilities
25
(15.2)
(12.7)
Provisions
24
(5.2)
(6.0)
(574.4)
(536.8)
Net current assets
171.7
150.3
Non-current liabilities
Bank and other loans
25
(664.9)
(579.8)
Trade and other payables
23
(36.8)
(31.8)
Deferred tax liabilities
10
(18.6)
(15.3)
Lease liabilities
25
(36.3)
(38.6)
Retirement benefit obligations
33
(0.8)
(1.2)
(757.4)
(666.7)
Total liabilities
(1,331.8)
(1,203.5)
Net assets
632.8
573.7
Equity
Share capital
28
9.1
9.1
Share premium account
29
199.3
196.4
Share incentive reserve
29
20.5
18.6
Currency translation reserve
29
17.7
10.6
Investment revaluation reserve
29
2.6
2.7
Other reserves
29
79.2
79.2
Retained earnings
299.2
247.4
Attributable to equity holders of the parent
627.6
564.0
Non-controlling interests
30
5.2
9.7
Total equity
632.8
573.7
The financial statements were approved by the Board of Directors and authorised for issue on 24 May 2022. They were signed on its
behalf by:
David Bower
Chief Financial Officer
24 May 2022
Group balance sheet
31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
141
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
Balance at 1 April 2021
9.1
196.4
18.6
10.6
2.7
79.2
247.4
564.0
9.7
573.7
Profit for the year
—
—
—
—
—
—
132.8
132.8
0.6
133.4
Other comprehensive income for the year
—
—
—
7.1
(0.1)
—
2.8
9.8
0.3
10.1
Total comprehensive income
—
—
—
7.1
(0.1)
—
135.6
142.6
0.9
143.5
Dividends paid (note 11)
—
—
—
—
—
—
(89.3)
(89.3)
—
(89.3)
Issue of share capital (note 28)
—
2.9
—
—
—
—
—
2.9
—
2.9
Share-based payments
—
—
4.8
—
—
—
—
4.8
—
4.8
Share options exercised
—
—
(2.9)
—
—
—
—
(2.9)
—
(2.9)
Tax on exercised share options (note 10)
—
—
—
—
—
—
0.2
0.2
—
0.2
Deferred tax on share options (note 10)
—
—
—
—
—
—
0.1
0.1
—
0.1
Changes in non-controlling interests
—
—
—
—
—
—
5.2
5.2
(5.4)
(0.2)
Balance at 31 March 2022
9.1
199.3
20.5
17.7
2.6
79.2
299.2
627.6
5.2
632.8
Year ended 31 March 2021
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
Balance at 1 April 2020
9.0
189.3
21.9
37.0
(0.6)
79.2
299.9
635.7
10.6
646.3
Profit for the year
—
—
—
—
—
—
31.1
31.1
0.7
31.8
Other comprehensive expense
for the year
—
—
—
(26.4)
3.3
—
(3.6)
(26.7)
(1.1)
(27.8)
Total comprehensive income
—
—
—
(26.4)
3.3
—
27.5
4.4
(0.4)
4.0
Dividends paid (note 11)
—
—
—
—
—
—
(80.5)
(80.5)
—
(80.5)
Issue of share capital (note 28)
0.1
7.1
—
—
—
—
—
7.2
—
7.2
Share-based payments
—
—
3.8
—
—
—
—
3.8
—
3.8
Share options exercised
—
—
(7.1)
—
—
—
—
(7.1)
—
(7.1)
Tax on exercised share options (note 10)
—
—
—
—
—
—
1.5
1.5
—
1.5
Deferred tax on share options (note 10)
—
—
—
—
—
—
(1.0)
(1.0)
—
(1.0)
Changes in non-controlling interests
—
—
—
—
—
—
—
—
(0.5)
(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
1 Other reserves comprise the Merger, Own shares and Capital redemption reserves. Full details of these reserves are included in Note 29.
Group statement of changes in equity
Year ended 31 March 2022
Financial statements
HomeServe plc Annual Report & Accounts 2022
142
Notes
2022
£m
2021
£m
Net cash inflow from operating activities
31
207.6
223.0
Investing activities
Interest received
0.1
0.1
Proceeds on disposal of fixed assets
8.8
0.3
Purchases of intangible assets
(63.0)
(62.8)
Contract costs
(1.3)
(1.5)
Purchases of property, plant and equipment
(6.2)
(7.1)
Contribution to equity accounted investee
18
(3.6)
(2.2)
Loan to investee
17
(1.3)
—
Business disposals
16
3.0
(3.9)
Business acquisitions
16
(130.8)
(77.3)
Net cash used in investing activities
(194.3)
(154.4)
Financing activities
Dividends paid
11
(89.3)
(80.5)
Repayment of lease principal
25
(14.7)
(14.8)
Acquisition of non-controlling interests
30
(18.2)
—
New bank and other loans raised
25
30.0
243.4
Costs associated with new bank and other loans raised
25
(0.3)
(2.2)
Proceeds from loans and borrowings
25
123.2
27.1
Repayment of loans and borrowings
25
(39.9)
(214.6)
Net cash used in financing activities
(9.2)
(41.6)
Net increase in cash and cash equivalents, net of bank overdrafts
4.1
27.0
Cash and cash equivalents, net of bank overdrafts, at the beginning of the year
149.4
131.2
Impact of foreign exchange rate changes
4.0
(8.8)
Cash and cash equivalents, net of bank overdrafts, at the end of the year
157.5
149.4
Group cash flow statement
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
143
1. General information
HomeServe plc (the ‘Company’), the ultimate Parent 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 UK-adopted International Accounting Standards in conformity with
the requirements of the Companies Act 2006 and prepared in accordance with International Financial Reporting Standards. On 31
December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK adopted international
accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group and the Company
transitioned to UK adopted International Accounting Standards in its consolidated financial statements on 1 April 2021. There were no
impacts on, or changes in accounting from the transition.
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 16
COVID-19 Related Rent Concessions and COVID-19 Related Rent Concessions
beyond 30 June 2021
Amendments to IFRS 9, IAS 39 and IFRS 7,
Interest Rate Benchmark Reform – Phase 2
IFRS 4 and IFRS 16
None of the items listed above have had any material impact on the amounts reported in this consolidated set of financial statements.
IFRIC Agenda Decision – Configuration or customisation costs in ‘Software as a Service’ (SaaS) cloud computing arrangements
In April 2021, the International Financial Reporting Interpretations Committee (IFRIC) clarified the treatment of customisation and
configuration costs in SaaS cloud computing arrangements. As a result, from 1 April 2021, the Group revised its accounting policy in
relation to configuration and customisation costs incurred in implementing SaaS solutions.
Historically, the Group has capitalised costs directly attributable to the configuration and customisation of SaaS arrangements as
intangible assets on the balance sheet. Following the adoption of the IFRIC agenda decision, all SaaS arrangements were identified and
assessed to determine if the Group had control of the underlying SaaS software or a separate intangible asset had been generated. For
those arrangements where the Group does not have control of the SaaS software asset and customisation and configuration services
are provided by the SaaS supplier, the Group recognises the costs of that software as a prepayment over the period it expects to utilise
the software. Where those services are provided by another party the costs are expensed in the income statement when the service is
received.
The change in accounting policy did not have a material impact on earlier periods and therefore the comparatives were not restated.
The timing and quantum of cash flows associated with SaaS arrangements are unaffected by this change.
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
Insurance Contracts
Amendments to IFRS 10 and IAS 28
Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture
Amendments to IAS 1
Classification of Liabilities as Current or Non-Current
Amendments to IFRS 3
Reference to Conceptual Framework
Amendments to IAS 16
Property, Plant and Equipment – Proceeds before Intended Use
Amendments to IAS 37
Onerous Contracts – Costs of Fulfilling a Contract
Annual Improvements to IFRSs
Standards 2018-2020 Cycle
Amendments to IAS 1 and IFRS Practice Statement 2
Disclosure of Accounting Policies
Amendments to IAS 8
Definition of Accounting Estimates
Amendments to IAS 12
Deferred Tax related to Assets and Liabilities arising from a Single Transaction
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.
Notes to financial statements
Year ended 31 March 2022
Financial statements
HomeServe plc Annual Report & Accounts 2022
144
2. Significant accounting policies (continued)
Going concern
The Group’s business activities, together with the factors likely to affect its future development, including the potential impacts of
the COVID-19, climate change, 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 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.
On 19 May 2022, Brookfield Infrastructure announced a recommended cash offer for the entire issued, and to be issued share
capital of the Company, to be effected by means of a court approved scheme of arrangement under Part 26 of the UK Companies
Act 2006. The proposed acquisition is subject to shareholder approval, approval of the courts and approval from a number of
regulatory authorities.
The Viability statement and Going Concern statement in this report take no account of the proposed acquisition and have therefore
been prepared on a stand-alone basis.
Based on the collective assessment of the information described above, the Directors confirm that they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of the
assessment.
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 2021:
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.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
145
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.
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).
Financial statements
HomeServe plc Annual Report & Accounts 2022
146
2. Significant accounting policies (continued)
Other accounting policies (continued)
Revenue recognition (continued)
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).
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.
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.
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, HVAC maintenance contracts 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.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
147
Revenue stream
Nature and timing of satisfaction of performance obligations
Significant payment terms
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.
Either billed and paid as leads
are delivered or deposits from
customers received in advance
then reduced as billed when
leads are delivered.
HVAC installations
Includes the provision of installation services at the point in time the
installation is complete.
Billed and paid upon
completion of the installation.
Other
Principally includes services provided to customers who do not hold policies.
Revenue is recognised at the point in time the service is complete.
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 statements
HomeServe plc Annual Report & Accounts 2022
148
2. Significant accounting policies (continued)
Other accounting policies (continued)
Adjusting and exceptional items (continued)
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 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 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.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
149
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.
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 flows 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.
Financial statements
HomeServe plc Annual Report & Accounts 2022
150
2. Significant accounting policies (continued)
Other accounting policies (continued)
Goodwill (continued)
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.
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.
Software costs are stated at cost less accumulated amortisation. Capitalised costs comprise third party and internal payroll costs where
the employee time is directly attributable to the development of the software. In accordance with the criteria of IAS 38, software costs
are capitalised if the Group has control over the asset generated or a separately identifiable asset has been created. External costs
incurred as part of a service agreement, which do not meet the criteria of IAS 38 are prepaid and amortised over the period of expected
use of the service. Other costs which do not meet the criteria for capitalisation are expensed to the income statement as incurred.
When the software is available for its intended use, these costs are amortised on a straight-line basis over the expected useful
economic life.
Amortisation
Amortisation is charged so as to write off the cost of intangible assets over their estimated useful economic lives, using the straight-line
method, on the following bases:
Acquired access rights
3 - 20 years
Access rights and trademarks
up to a maximum of 20 years
Acquired customer databases
3 - 15 years
Customer databases
3 - 10 years
Other acquired intangibles
8 - 11 years
Computer software
3 - 10 years
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
151
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
25 - 50 years
Furniture, fixtures and equipment
5 - 7 years
Computer equipment
3 - 7 years
Motor vehicles
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.
Inventory
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
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.
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 lease payments (including in substance fixed payments), less any lease incentives;
• 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);
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
• the amount expected to be payable by the lessee under residual value guarantees;
• the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
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;
Financial statements
HomeServe plc Annual Report & Accounts 2022
152
2. Significant accounting policies (continued)
Other accounting policies (continued)
Leases (continued)
Lease liabilities (continued)
• 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 or 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.
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.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
153
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:
• the Group’s business model for managing the assets; and
• whether the instruments’ contractual cash flows represent “Solely Payments of Principal and Interest” on the principal amount
outstanding (the “SPPI criterion”).
Trade and other 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), and with the cessation
of GBP LIBOR, the Group successfully negotiated to transition to SONIA plus a credit adjustment spread. The facilities will continue to
apply USD LIBOR where applicable until June 2023 at which point it is expected that facilities will transition to SOFR based rates.
Trade and other 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 statements
HomeServe plc Annual Report & Accounts 2022
154
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
in an emerging ‘COVID endemic’ environment.
As set out in the Task Force on Climate-Related Financial Disclosures (TCFD) report on page 29, climate change is a global challenge and
an emerging risk to businesses, people and the environment. Therefore, in preparing the financial statements, the Group has considered
the impact of climate-related risks on its financial position and performance. While the effects of climate change represent a source of
uncertainty, the Group does not consider there to be a material impact on its judgements and estimates from the physical or transition
risks in the short to medium-term.
All key 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
No critical accounting judgements have been identified in the application of the Group’s accounting policies.
Key sources of estimation uncertainty
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 £667.9m (FY21: £564.3m). The carrying value of acquisition intangibles is £264.9m (FY21: £253.2m).
Following the FY22 annual impairment review, no impairment charges were recorded (FY21: £nil). 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.
At 31 March 2022 all CGUs, with the exception of Habitissimo, have recoverable amounts that exceed the carrying value of goodwill by
more than 70% (FY21: all CGUs by more than 40% with the exception of Habitissimo at 14%). For Habitissimo, significant investment is
planned within the typical three year recoverable period. This investment is designed to accelerate growth over the medium to long-
term but results in a supressed cash flow position in the short-term. As a result, we have extended the cash flows in the test of the
Habitissimo CGU to cover a five-year period. This enables a more balanced analysis that includes both the significant investment and the
returns associated with that investment. In this scenario, the recoverable value of net assets in this CGU exceeds its carrying value at 31
March 2022 by 131%. Using the three year cash flow forecast for Habitssimo, which includes the investment but excludes the associated
returns, would see an impairment of £7.8m.
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 FY22 the Group identified intangible assets associated with business combinations totalling £45.0m (FY21: £28.6m). If the various
judgements the Group takes in valuing these assets deviated such that the total acquired fair value of FY22 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 7.5 years for in-year acquired intangibles, this would cause a per annum impact of +/- £0.9m to the income statement
(FY21: average useful economic life of 6.8 years, +/- £0.6m).
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
155
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 obligations 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 sources of estimation uncertainty. 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 2022 increased from the amount recorded
(£19.0m, see notes 22 & 23) by £0.5m (FY21: £1.6m, amount recorded £34.3m). In the downside forecast scenario the carrying value of
the obligations at 31 March 2022 decreased by £1.5m (FY21: £2.1m).
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 2022 in respect of the Group’s
future claims handing obligations is £41.7m (FY21: £40.7m). 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 £6.3m (FY21: £6.1m).
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 2022 in respect of potential future cancellations is £26.5m (FY21: £23.6m).
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, 84% (FY21: 83%), by more
than 3 ppts (FY21: 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 £4.0m (FY21: £3.5m).
4. Segmental information and revenue from contracts with customers
Segment revenues and results
Underneath the Group’s 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 the results of Germany (since acquisition on 12
January 2022)).
Financial statements
HomeServe plc Annual Report & Accounts 2022
156
4. Segmental information and revenue from contracts with customers (continued)
Segment revenues and results (continued)
The Home Experts division, splits into three geographic IFRS 8 segments; 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), Shermin Finance (UK) (since acquisition on 14 June 2021, see note 16) and Home Experts France (until the point of
disposal on 15 May 2020)).
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.
Membership & HVAC
Membership & HVAC – EMEA
Home Experts
2022
North
America
£m
UK
£m
France
£m
Spain
£m
New
Markets
£m
UK
£m
North
America
£m
Other
£m
Total
£m
Revenue
Net policy income
408.7
212.5
116.2
43.8
—
—
—
—
781.2
Repair income
80.4
95.7
0.2
145.1
—
—
—
—
321.4
HVAC installations
89.3
17.2
30.7
7.6
0.8
—
—
—
145.6
Home Experts
—
—
—
—
—
55.6
88.9
10.7
155.2
Other
4.6
12.1
5.6
11.0
—
—
—
—
33.3
Total revenue
583.0
337.5
152.7
207.5
0.8
55.6
88.9
10.7
1,436.7
Inter-segment
—
(7.4)
—
—
—
—
—
—
(7.4)
External revenue
583.0
330.1
152.7
207.5
0.8
55.6
88.9
10.7
1,429.3
Result
Adjusted operating profit/(loss) 1
117.7
72.9
36.4
20.8
(5.6)
(2.8)
10.6
(3.5)
246.5
Certain transaction related income/(costs)
3.2
—
(0.1)
—
—
—
(2.0)
(0.1)
1.0
Amortisation of acquisition intangibles
(19.2)
(4.0)
(6.9)
(3.2)
—
(4.6)
(5.9)
(1.1)
(44.9)
Operating profit/(loss)
101.7
68.9
29.4
17.6
(5.6)
(7.4)
2.7
(4.7)
202.6
Investment income
0.3
Finance costs
(27.8)
Profit before tax
175.1
Tax
(41.7)
Profit for the year
133.4
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
157
Membership & HVAC
Membership & HVAC – EMEA
Home Experts
2021
North
America
£m
UK
£m
France
£m
Spain2
£m
New
Markets
£m
UK
£m
North
America
£m
Other
£m
Total
£m
Revenue
Net policy income
388.1
233.2
113.0
48.9
—
—
—
—
783.2
Repair income
57.1
80.3
0.3
131.2
—
—
—
—
268.9
HVAC installations
57.9
12.1
16.0
6.9
—
—
—
—
92.9
Home Experts
—
—
—
—
—
38.9
91.3
9.6
139.8
Other
3.3
13.3
3.3
8.7
—
—
—
—
28.6
Total revenue
506.4
338.9
132.6
195.7
—
38.9
91.3
9.6
1,313.4
Inter-segment
—
(8.7)
—
—
—
—
—
—
(8.7)
External revenue
506.4
330.2
132.6
195.7
—
38.9
91.3
9.6
1,304.7
Result
Adjusted operating profit/(loss) 1
105.0
72.5
35.6
17.7
(6.3)
(16.0)
13.2
(7.4)
214.3
Exceptional items
—
(87.8)
—
(0.6)
(3.7)
—
—
(0.3)
(92.4)
Certain transaction related costs
(2.0)
—
—
—
—
—
(3.1)
—
(5.1)
Amortisation of acquisition intangibles
(20.8)
(3.2)
(7.2)
(2.4)
—
(4.6)
(6.2)
(0.6)
(45.0)
Operating profit/(loss)
82.2
(18.5)
28.4
14.7
(10.0)
(20.6)
3.9
(8.3)
71.8
Investment income
0.4
Finance costs
(25.0)
Profit before tax
47.2
Tax
(15.4)
Profit for the year
31.8
1 Adjusted operating profit is defined in the Glossary to the Annual Report & Accounts on page 217.
2 Comparatives for the year to 31 March 2021 have been updated for the reclassification of £8.7m of Spanish HVAC on demand revenue from HVAC installations to other income.
Net policy income includes £52.2m of home assistance revenue (FY21: £52.7m) where the Group contracts directly with the end user and not through
an underwriter.
Segment information
Assets
Liabilities
Non-current asset
additions
Depreciation, amortisation
and impairment
2022
£m
2021
£m
2022
£m
2021
£m
2022
£m
2021
£m
2022
£m
2021
£m
Membership & HVAC
North America
636.1
586.7
709.6
670.7
24.0
24.0
42.0
41.0
Membership & HVAC – EMEA
UK
1,225.3
1,068.3
895.4
768.7
14.6
19.2
18.6
116.1
France
286.1
265.0
185.4
174.3
19.0
19.0
19.5
17.1
Spain
201.2
176.6
142.9
117.6
8.0
9.8
13.4
16.2
New Markets
10.2
0.8
9.2
—
—
—
—
—
Home Experts
UK
105.9
111.8
19.2
20.8
9.5
9.3
11.3
9.1
North America
129.3
122.3
13.0
18.3
1.7
0.1
6.4
6.7
Other
26.8
21.3
13.4
8.7
2.3
2.7
2.9
2.1
Inter-segment
(656.3)
(575.6)
(656.3)
(575.6)
—
—
—
—
Total
1,964.6
1,777.2
1,331.8
1,203.5
79.1
84.1
114.1
208.3
All assets and liabilities including inter-segment loans and trading balances are allocated to reportable segments.
In FY21 these figures included £84.7m 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.
Financial statements
HomeServe plc Annual Report & Accounts 2022
158
4. Segmental information and revenue from contracts with customers (continued)
Information about major customers
During FY22 two (FY21: three) underwriters were customers of the Group that individually accounted for over 10% of the Group’s
revenue:
2022
%
2021
%
Customer 1 - UK
19.9
23.5
Customer 2 - North America
15.9
16.1
Customer 3 - North America
9.1
11.8
Other customers individually representing below 10% of Group revenue
55.1
48.6
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:
Revenue from external
customers
Non-current assets
2022
£m
2021
£m
2022
£m
2021
£m
USA
670.1
596.0
426.0
399.1
UK
385.4
368.5
417.2
354.9
Spain
207.0
199.1
144.5
100.6
France
152.3
132.6
191.2
181.0
Other
14.5
8.5
7.2
19.3
1,429.3
1,304.7
1,186.1
1,054.9
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
contractual arrangements is £66.6m (FY21: £62.2m). In the Membership & HVAC businesses this balance relates to the Group’s
contracts with underwriters to sell policies and subsequently provide ancillary services, including claims handling, as well as
scenarios where the Group contracts directly with the end user on a non-underwritten basis and is obligated to provide further
services after the point of sale. In the Home Experts businesses, our future performance obligations principally include the provision
of leads or directory advertising services. The obligations associated with the outstanding transaction price are expected to be
fulfilled, and revenue fully recognised, within the next 12 months.
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:
2022
£m
2021
£m
Current assets
Amounts receivable for the provision of services (see note 20)
458.0
424.0
Accrued income
19.5
18.1
Current liabilities
Deferred income
66.6
62.2
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
159
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 advanced
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.
Significant changes in accrued and deferred income balances during the year were as follows:
Accrued
Income
£m
Deferred
Income
£m
At 1 April 2020
16.9
51.7
Transfers to receivables
(14.6)
—
Revenue recognised from the opening balance
—
(44.9)
Revenue deferred not yet earned
—
54.6
Revenue earned not yet due
16.3
—
Business combinations
—
4.0
Foreign exchange
(0.5)
(3.2)
At 1 April 2021
18.1
62.2
Transfers to receivables
(18.1)
—
Revenue recognised from the opening balance
—
(62.2)
Revenue deferred not yet earned
—
62.0
Revenue earned not yet due
19.5
—
Business combinations
0.1
3.6
Foreign exchange
(0.1)
1.0
At 31 March 2022
19.5
66.6
Revenue deferred not yet earned is presented net of amounts created and released within the same reporting period. Revenue
recognised in 2022 and 2021 in relation to performance obligations satisfied (or partially satisfied) in previous periods was immaterial.
Contract costs
£m
At 1 April 2020
16.8
Additions
0.6
Amortisation
(9.0)
Impairment
(0.1)
Foreign exchange
(0.1)
At 1 April 2021
8.2
Additions
1.5
Amortisation
(5.6)
Foreign exchange
—
At 1 April 2022
4.1
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 statements
HomeServe plc Annual Report & Accounts 2022
160
5. Profit for the year
Profit for the year has been arrived at after charging/(crediting):
Notes
2022
£m
2021
£m
Included in operating costs:
Staff remuneration
6
414.1
389.1
Cost of inventories recognised as an expense
39.1
25.2
Depreciation of right-of-use assets
26
15.1
15.2
Depreciation of property, plant and equipment
15
10.3
9.9
Amortisation of acquisition intangible assets
14
44.9
45.0
Amortisation of other intangible assets
14
38.2
44.4
Amortisation of contract costs
4
5.6
9.0
(Gain)/loss on disposal of property, plant and equipment, intangibles and contract costs 1
(6.0)
1.1
(Gain)/loss on disposal of associate
18
(0.8)
2.1
(Gain)/loss on disposal of businesses
16
(4.3)
0.1
Net amounts written off on trade receivables and contract assets
20
3.5
2.1
Impairment of goodwill, acquired intangibles and contract costs
—
0.1
Exceptional items
7
—
92.4
Expenses relating to variable lease payments not included in the measurement of lease liabilities
2.4
1.4
Expenses relating to leases of low value assets, excluding short-term leases of low value assets
0.4
0.4
Expenses relating to short-term leases
1.9
0.7
1 The gain on disposal predominately relates to the Piedmont policy book disposal (see note 14), the gain has been fully reinvested in marketing.
The analysis of auditor’s remuneration is as follows:
2022
£000
2021
£000
Fees payable to the Company’s auditor for the audit of the Company’s annual financial statements
312
202
The audit of the Company’s subsidiaries pursuant to legislation
1,378
1,137
Total audit fees
1,690
1,339
Audit-related assurance services
103
66
Total non-audit fees
103
66
Total auditor’s remuneration
1,793
1,405
Audit related assurance services are in respect of the review of the interim financial information, review of the iXBRL electronically tagged
Group accounts 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.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
161
6. Staff remuneration
The average monthly number of employees (including Executive Directors) was:
2022
number
2021
number
UK (including Head Office)
3,165
3,068
Continental Europe
2,879
2,271
North America
2,590
2,108
8,634
7,447
2022
£m
2021
£m
Their aggregate remuneration comprised:
Wages and salaries
359.6
337.7
Social security costs
43.8
40.9
Other pension costs (note 33)
8.0
7.7
Other long-term benefits
2.7
2.8
414.1
389.1
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 £44.9m (FY21: £45.0m), comprised the following:
2022
£m
2021
£m
Costs of put options on non-controlling interests accrued over time
2.7
2.8
Fair value (gains)/losses on option obligations and contingent consideration
(3.7)
2.3
Certain transaction related (income)/costs included within operating costs
(1.0)
5.1
Unwinding of discount on option obligations and contingent consideration
1.3
1.6
Certain transaction related costs included within finance costs
1.3
1.6
Total certain transaction related costs included in profit before tax
0.3
6.7
Net taxation on certain transaction related costs
(0.1)
(1.7)
Total certain transaction related costs after tax
0.2
5.0
Exceptional items, booked to operating costs, comprised the following:
2022
£m
2021
£m
Impairment charges and associated costs
—
86.9
Restructuring costs
—
5.5
Exceptional items included within operating profit before tax
—
92.4
Net taxation on exceptional items
—
(17.6)
Net exceptional items after tax
—
74.8
Financial statements
HomeServe plc Annual Report & Accounts 2022
162
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, similar to that implemented successfully in France and
which is planned for implementation in North America. This change resulted in an impairment charge being recognised for the asset’s
full carrying amount. Impairment and associated charges related to eServe were 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 were 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 prior year, significant charges were 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 was streamlined,
which resulted in an exceptional cost of £3.7m. Secondly, as part of this refocusing, additional redundancy charges of £1.8m were
recorded as the Group seeked to refocus its corporate functions and migrate back to a more federated operating model. Aggregate
costs of the refocusing exercise were classified as exceptional in the consolidated income statement due to their size, nature and
incidence.
8. Investment income
2022
£m
2021
£m
Interest on bank deposits
0.1
0.1
Other interest
0.2
0.3
0.3
0.4
9. Finance costs
2022
£m
2021
£m
Interest on bank and other loans
24.2
20.3
Interest on lease liabilities
1.2
1.4
Unwinding of discount on deferred consideration
0.7
0.8
Unwinding of discount on contingent consideration
0.6
0.6
Unwinding of discount on obligations under put options
0.7
1.0
Other interest
0.6
0.8
Exchange movements
(0.2)
0.1
27.8
25.0
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
163
10. Taxation
2022
£m
2021
£m
Current tax
Current year charge
39.1
40.5
Adjustments in respect of prior years
(1.0)
(2.0)
Total current tax charge
38.1
38.5
Deferred tax charge/(credit)
3.6
(23.1)
Total tax charge
41.7
15.4
The pre-exceptional effective tax rate for the year ended 31 March 2022 was 24% (FY21: 24%). The post-exceptional effective tax rate for
the same period was 24% (FY21: 33%). UK corporation tax is calculated at 19% (FY21: 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 was substantively enacted on 24 May 2021 when the UK’s deferred taxes
were re-measured accordingly. However, based on the UK’s deferred tax position this UK tax rate increase did 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 26% in the US (FY21: 25%), 27% in France (FY21: 28%), 25% in Spain (FY21: 25%), a blended rate of 30% in Germany (FY21: 30%) and
a blended rate of 28% in Italy (FY21: substitute tax of 12%), which explains the ‘Overseas tax rate differences’ below. 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:
2022
£m
2021
£m
Profit before tax on continuing operations
175.1
47.2
Tax at the UK corporation tax rate of 19% (FY21: 19%)
33.3
9.0
Tax effect of items that are not deductible in determining taxable profit
0.5
—
Adjustments in respect of prior years – current tax
(1.0)
(2.0)
Deferred tax rate adjustment
(0.3)
—
Adjustments in respect of prior years – deferred tax
0.2
1.3
Overseas tax rate differences
9.0
7.1
Tax expense for the year
41.7
15.4
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.
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 final 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 issued with a charging notice in January 2021, 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, the Group paid the tax arising during the financial year ended 31 March 2021, which was not material.
The Group had previously included the calculation of the potential liability within its uncertain income tax estimation within current
tax liabilities in the Group Balance Sheet. The Group in FY21 had utilised this tax provision in settling the HMRC charging notice and
therefore it had no adverse impact upon the Group’s effective tax rate in FY21.
Financial statements
HomeServe plc Annual Report & Accounts 2022
164
10. Taxation (continued)
A retirement benefit tax charge of £0.9m (FY21: credit £0.9m) has been recognised directly in other comprehensive income. In addition
to the amounts (charged)/credited to the income statement and other comprehensive income, the following amounts relating to tax
have been recognised directly in equity:
2022
£m
2021
£m
Current tax
Excess tax deductions related to share-based payments on exercised options
0.2
1.5
Deferred tax
Change in estimated excess tax deductions related to share-based payments
0.1
(1.0)
Total tax recognised directly in equity
0.3
0.5
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)
Timing
differences
£m
Elected
goodwill
deductions
£m
Retirement
benefit
obligations
£m
Share
schemes
£m
Acquired
intangible
assets
£m
Unutilised
losses
£m
Investment
revaluation
reserve
£m
Total
£m
At 1 April 2020
(8.0)
(0.8)
(1.9)
4.6
(18.9)
4.8
—
(20.2)
Credit/(charge) to Income
15.7
(1.0)
(0.4)
(1.0)
10.7
(0.9)
—
23.1
Charge to equity
—
—
—
(1.0)
—
—
—
(1.0)
(Charge)/credit to Comprehensive Income
—
—
0.9
—
—
—
(1.3)
(0.4)
Business acquisitions
—
(0.3)
—
—
(3.5)
—
—
(3.8)
Transfers
(0.6)
0.1
0.1
—
0.3
0.1
—
—
Exchange movements
—
0.1
—
(0.1)
0.2
(0.4)
—
(0.2)
At 1 April 2021
7.1
(1.9)
(1.3)
2.5
(11.2)
3.6
(1.3)
(2.5)
(Charge)/credit to Income
(7.9)
1.8
(1.3)
(0.2)
4.7
(0.7)
—
(3.6)
Credit to equity
—
—
—
0.1
—
—
—
0.1
Charge to Comprehensive Income
—
—
(0.9)
—
—
—
—
(0.9)
Business acquisitions
—
—
—
—
(9.3)
—
—
(9.3)
Adjustments to prior year acquisitions
—
—
—
—
(0.3)
—
—
(0.3)
Transfers
—
0.3
—
—
(0.3)
—
—
—
Exchange movements
(0.1)
(0.1)
—
—
0.3
0.1
—
0.2
At 31 March 2022
(0.9)
0.1
(3.5)
2.4
(16.1)
3.0
(1.3)
(16.3)
The majority of the FY22 charge within timing differences is driven by HVAC acquisitions in our North American segment whereby tax
deductions on tangible assets are claimed more quickly when compared to the associated accounting expense which is amortised
over longer useful economic lives, resulting in deferred tax liabilities being recognised. Due to the acquisitive nature of the Group, we
have also recognised deferred tax liabilities in respect of our business acquisitions as some of this capital expenditure will not be tax
deductible. The majority of unutilised losses are expected to be utilised within twelve months.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
165
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:
2022
UK
£m
France
£m
Spain
£m
Italy
£m
Germany
£m
North
America
£m
Total
£m
Deferred tax assets
—
—
—
—
—
2.3
2.3
Deferred tax liabilities
(2.2)
(13.3)
(1.4)
—
(1.7)
—
(18.6)
Net deferred tax (liabilities)/assets
(2.2)
(13.3)
(1.4)
—
(1.7)
2.3
(16.3)
2021
UK
£m
France
£m
Spain
£m
Italy
£m
Germany
£m
North
America
£m
Total
£m
Deferred tax assets
4.6
—
0.9
—
—
7.3
12.8
Deferred tax liabilities
—
(13.7)
—
(0.3)
(1.3)
—
(15.3)
Net deferred tax (liabilities)/assets
4.6
(13.7)
0.9
(0.3)
(1.3)
7.3
(2.5)
Deferred tax has not been recognised on £13.2m (FY21: £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
2022
£m
2021
£m
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 March 2021 of 19.8p (2020: 17.8p) per share
66.5
59.7
Interim dividend for the year ended 31 March 2022 of 6.8p (2021: 6.2p) per share
22.8
20.8
89.3
80.5
In light of the offer for the Group, the Board is not recommending payment of a final dividend. However, if the offer terminates, the
Board will look to declare an interim dividend in accordance with the Company’s Articles of Association (FY21: final dividend of 19.8p per
share amounting to £66.5m).
Financial statements
HomeServe plc Annual Report & Accounts 2022
166
12. Earnings per share
2022
pence
2021
pence
Basic
39.5
9.3
Diluted
39.3
9.2
Adjusted basic
49.3
42.7
Adjusted diluted
49.1
42.6
The calculation of the basic and diluted earnings per share is based on the following data:
Number of shares
2022
m
2021
m
Weighted average number of shares
Basic
336.3
335.8
Dilutive impact of share options
1.2
1.0
Diluted
337.5
336.8
Earnings
2022
£m
2021
£m
Profit for the year attributable to equity holders of the parent
132.8
31.1
Amortisation of acquisition intangibles
44.9
45.0
Certain transaction related costs (note 7)
0.3
6.7
Exceptional items (note 7)
—
92.4
Tax impact arising on adjusting and exceptional items
(10.9)
(29.7)
Non-controlling interests' share of adjusting items
(1.4)
(2.1)
Adjusted profit for the year attributable to equity holders of the parent
165.7
143.4
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
£m
Cost
At 1 April 2020
509.9
Recognised on business acquisitions
72.3
Adjustment related to prior year acquisitions
4.1
Exchange movements
(22.0)
At 1 April 2021
564.3
Recognised on business acquisitions
96.3
Adjustment related to prior year acquisitions
(0.1)
Exchange movements
7.4
At 31 March 2022
667.9
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
167
Adjustments to provisional balances
During FY22 the provisional fair values for the acquisitions completed in FY21 and disclosed as part of the Group’s FY21 Annual Report
were updated leading to a total net £0.1m decrease to goodwill at 31 March 2022. This decrease in goodwill arose due to fair value
adjustments increasing the value of intangible assets identified on acquisition by £1.1m, deferred tax liabilities by £0.3m and a £0.7m
decrease in other acquired net assets. The fair value adjustments arose across nine prior year acquisitions.
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% (FY21: 2%). Changes in selling prices and direct costs are based on expectations of future changes in the market.
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
2022
2021
Membership & HVAC – North America
North America
10.7%
10.9%
Membership & HVAC – EMEA UK
UK
10.8%
10.4%
Membership & HVAC – EMEA France
France
10.1%
9.5%
Membership & HVAC – EMEA Spain
Spain
10.7%
10.2%
Membership & HVAC – EMEA New Markets
Germany
11.1%
—
Home Experts - UK
Checkatrade
12.8%
11.8%
Home Experts - North America
eLocal
12.6%
12.5%
Home Experts - Other
Habitissimo
12.6%
11.6%
Home Experts - Other
Consumer Finance
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 increase in the discount rates versus FY21 reflects the increased market uncertainty
brought about by recent geopolitical events and the associated impact of this on the cost of both equity and debt.
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, the Group believes that, for all CGUs other than Habitissimo, 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 4.0ppts
(to 16.6%) for headroom to reduce to £nil. Performing the same sensitivities on the terminal free cash flow assumption would require
reductions of 25% to reduce headroom to £nil. As detailed in note 3 the Group performed additional scenario analysis over the
Habitissimo CGU, due to the significant investment and associated returns, see note 3 for further details.
Financial statements
HomeServe plc Annual Report & Accounts 2022
168
13. Goodwill (continued)
The carrying amount of goodwill has been allocated, by CGU, as follows:
2022
£m
2021
£m
North America
119.4
94.3
UK
227.9
183.8
France
110.2
103.4
Spain
73.1
53.6
Germany
3.9
—
Checkatrade
58.6
58.6
eLocal
60.9
58.2
Habitissimo
12.4
12.4
Consumer Finance
1.5
—
667.9
564.3
The Group’s CGUs do not contain any intangible assets with indefinite useful economic lives.
14. Other intangible assets and prepaid software
Other intangible assets and prepaid software on the balance sheet include £421.4m (FY21: £391.3m) of intangible assets and £2.7m
(FY21: £nil) of prepaid software assets related to ‘Software as a Service’ arrangements. Other intangible assets are categorised as follows:
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
Cost
At 1 April 2020
207.9
246.9
15.3
470.1
43.0
31.4
298.4
842.9
Additions
0.8
0.6
—
1.4
0.7
15.0
52.8
69.9
Business acquisitions
2.0
26.6
—
28.6
—
—
1.2
29.8
Disposals
—
(1.2)
—
(1.2)
(0.4)
—
(1.7)
(3.3)
Disposal of business
—
—
—
—
—
—
(0.3)
(0.3)
Adjustments to prior year acquisitions 1
(1.2)
—
(0.2)
(1.4)
—
—
—
(1.4)
Exchange movements
(19.7)
(15.7)
(0.1)
(35.5)
(1.7)
(2.2)
(8.0)
(47.4)
At 1 April 2021
189.8
257.2
15.0
462.0
41.6
44.2
342.4
890.2
Additions
2.8
0.1
—
2.9
—
14.2
42.0
59.1
Business acquisitions
4.5
37.8
2.7
45.0
—
—
—
45.0
Disposals
—
(0.6)
—
(0.6)
(0.3)
(0.6)
(13.7)
(15.2)
Disposal of businesses
—
—
—
—
—
—
(14.1)
(14.1)
Adjustments to prior year acquisitions 1
—
1.1
—
1.1
—
—
—
1.1
Exchange movements
8.0
5.1
—
13.1
0.8
0.2
3.2
17.3
At 31 March 2022
205.1
300.7
17.7
523.5
42.1
58.0
359.8
983.4
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
169
Accumulated amortisation
At 1 April 2020
51.4
122.3
4.1
177.8
35.1
9.3
123.6
345.8
Charge for the year
15.6
27.4
2.0
45.0
2.3
6.8
35.3
89.4
Impairment
—
—
—
—
—
—
84.7
84.7
Disposals
—
(1.2)
—
(1.2)
(0.2)
—
(1.0)
(2.4)
Exchange movements
(4.5)
(8.3)
—
(12.8)
(1.2)
(0.7)
(3.9)
(18.6)
At 1 April 2021
62.5
140.2
6.1
208.8
36.0
15.4
238.7
498.9
Charge for the year
17.8
25.1
2.0
44.9
2.0
8.5
27.7
83.1
Disposals
—
(0.6)
—
(0.6)
(0.1)
(0.2)
(13.3)
(14.2)
Disposal of businesses
—
—
—
—
—
—
(13.9)
(13.9)
Transfers
4.0
(4.0)
—
—
—
—
—
—
Exchange movements
2.5
3.0
—
5.5
0.6
0.1
1.9
8.1
At 31 March 2022
86.8
163.7
8.1
258.6
38.5
23.8
241.1
562.0
Carrying amount
At 31 March 2022
118.3
137.0
9.6
264.9
3.6
34.2
118.7
421.4
At 31 March 2021
127.3
117.0
8.9
253.2
5.6
28.8
103.7
391.3
1 The carrying value of acquired intangible assets relating to prior year acquisitions were adjusted during the associated re-measurement periods increasing the value of acquired customer databases by
£1.1m (FY21: reducing acquired access rights by £1.2m), and goodwill by £1.1m (FY21: increasing goodwill by £1.4m and reducing other acquired intangibles by £0.2m). 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 (FY21: £nil).
The most significant intangible assets are customer relationships acquired as part of the acquisition of eLocal Holdings LLC in FY20 with
a book value of £46.8m (FY21: £51.0m), held within acquired access rights. The assets are being amortised over periods ranging between
10 and 11 years on a straight-line basis and have over 7 to 8 years useful economic life remaining.
Year ended 31 March 2022
Disposal of Piedmont policy book
On 10 December 2021, HomeServe USA Corp (‘HSUSA’) entered into an agreement to sell the book of policies built up during the
affinity partnership to Piedmont Natural Gas Company, Inc. (‘Piedmont’) ahead of the affinity partnership ending in April 2022. HSUSA
disposed of the policy book in two tranches, the first tranche completing in March 2022 and the second tranche in April 2022. As a
result in FY22 for tranche one of the transaction, the Group received $10.9m/£8.2m of cash consideration, derecognised intangible
assets of $0.5m/£0.4m, receivables of $2.9m/£2.1m and payables of $0.8m/£0.6m relating to commissions and underwriter payables.
This resulted in an initial gain on disposal of £6.3m being recorded in the income statement. The gain will be finalised following the
completion of the post close cash collection process on transferred accounts receivable balances during June. For further details on the
disposal of tranche two see note 35.
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. 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).
Financial statements
HomeServe plc Annual Report & Accounts 2022
170
15. Property, plant and equipment
Land & buildings
£m
Furniture, fixtures
& equipment
£m
Computer
equipment
£m
Motor
vehicles
£m
Total
£m
Cost
At 1 April 2020
40.8
14.9
35.5
4.7
95.9
Additions
0.5
0.7
4.2
1.7
7.1
Disposals
(0.2)
(0.1)
(1.9)
(0.3)
(2.5)
Business acquisitions
0.7
0.3
0.3
2.9
4.2
Exchange movements
(0.6)
(0.4)
(1.3)
(0.6)
(2.9)
At 1 April 2021
41.2
15.4
36.8
8.4
101.8
Additions
1.3
1.5
3.9
0.1
6.8
Disposals
(0.3)
(0.4)
(0.9)
(0.8)
(2.4)
Business acquisitions
0.1
0.5
—
1.4
2.0
Exchange movements
0.1
0.1
0.7
0.5
1.4
At 31 March 2022
42.4
17.1
40.5
9.6
109.6
Accumulated depreciation
At 1 April 2020
17.2
10.4
24.9
1.4
53.9
Charge for the year
2.1
1.5
4.9
1.4
9.9
Disposals
(0.2)
(0.1)
(1.5)
(0.2)
(2.0)
Exchange movements
(0.4)
(0.3)
(0.9)
(0.1)
(1.7)
At 1 April 2021
18.7
11.5
27.4
2.5
60.1
Charge for the year
2.0
2.3
4.5
1.5
10.3
Disposals
(0.2)
(0.4)
(0.9)
(0.6)
(2.1)
Exchange movements
0.1
0.2
0.4
0.2
0.9
At 31 March 2022
20.6
13.6
31.4
3.6
69.2
Carrying amount
At 31 March 2022
21.8
3.5
9.1
6.0
40.4
At 31 March 2021
22.5
3.9
9.4
5.9
41.7
At the balance sheet date, there are no contractual commitments for the purchase of property, plant and equipment (FY21: £nil).
16. Acquisitions and Disposals
The Group has incurred a net cash outflow in respect of business combinations of £130.8m in the year (FY21: £77.3m).
There were three material acquisitions in the year ended 31 March 2022:
• On 16 July 2021, HomeServe Skilled Trades LLC, a Group company, acquired 100% of the issued share capital and obtained control
of McLoughlin Plumbing & Heating Co., (hereafter ‘McLoughlin’), for total consideration of £13.4m. The acquisition of McLoughlin
continues to enhance the scale and scope of the Group’s HVAC capabilities in North America.
• On 22 October 2021, HomeServe Assistance Limited, a Group company, acquired 100% of the issued share capital and obtained
control of CET Structures Limited, (hereafter ‘CET’), for total consideration of £53.9m. The acquisition of CET is a significant step in
broadening the UK’s capabilities in home emergency assistance.
• On 14 January 2022, HomeServe Iberia S.L.U., a Group company acquired 100% of the issued share capital and obtained control of
Atecal 2001 S.L.U. and Sanimamp 2005 S.L.U. (hereafter collectively ‘Grupo MH’), for total consideration of £17.8m. The acquisition of
Grupo MH enhances the scale and scope of the Group’s HVAC capabilities in Spain.
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 2022.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
171
Membership
• On 7 June 2021, HomeServe Asistencia Spain SAU, a Group company, acquired 100% of the issued share capital and obtained control
of Servitis LDA (hereafter ‘Servitis’). The acquisition of Servitis continues to expand the Group’s home assistance services and increases
the opportunity for future growth in this market.
HVAC
In the year the Group made 18 HVAC acquisition for total consideration of £43.8m. The acquisitions made during FY22 enhance
the scale and scope of the Group’s HVAC capabilities and increase the opportunity for future growth related to new HVAC system
installations.
Date
Acquiree
Acquirer
Acquired
14 April 2021
Mark Gillece Plumbing and Heating LLC
HomeServe Skilled Trades LLC
100% share capital
31 August 2021
Mauger
ID Energies SAS
Group of assets constituting a
business under IFRS 3
31 August 2021
Confort & Chaleur
Roussin Energies SAS
Group of assets constituting a
business under IFRS 3
31 August 2021
JM Autin
Aujard SAS
Group of assets constituting a
business under IFRS 3
3 September 2021
Voinot Services
Aujard SAS
Group of assets constituting a
business under IFRS 3
10 September 2021
Esven Servicio Tecnico S.L.
HomeServe Iberia S.L.U.
100% share capital
20 September 2021
Vimar Sociedad Civil
Aragonesa De Postventa S.L.U.
and Servicio Tecnico Sate S.L.
100% share capital – 50% by each
acquirer (both Group companies)
30 September 2021
Alain Beal
SMT SAS
Group of assets constituting a
business under IFRS 3
30 September 2021
APG Domestic Services Limited
HomeServe Membership
Limited
100% share capital
31 October 2021
JCM Confort SAS & JC Technique SAS
HomeServe Energy Services
SAS
100% share capital
20 December 2021
Montgomery Brothers LLC (known as United Plumbing
Company)
HomeServe Skilled Trades LLC
100% share capital
31 December 2021
Dépann’Gaz SAS
ID Energies SAS
100% share capital
12 January 2022
Schneider & Steffens GmbH & Co. KG
HomeServe Deutschland
Handwerksdienstleistung
GmbH
100% share capital
28 January 2022
John Wilkinson Heating Services Limited
HomeServe Membership
Limited
100% share capital
31 January 2022
Hainaut Chauffage C.S.T.E SA
HomeServe Energy Services
Belgium SLR
100% share capital
7 February 2022
Olympic Aire Services Inc
HomeServe Skilled Trades LLC
100% share capital
14 March 2022
SureTemp Air Conditioning LLC
Arizona Dukes of Air LLC
100% share capital
25 March 2022
Electricidad Angulo
Atecal 2001 S.L.U.
Group of assets constituting a
business under IFRS 3
Home Experts
• On 14 June 2021, HomeServe Assistance Limited, a Group company, acquired 100% of the issued share capital and obtained control
of VBF Holdings Limited. VBF Holdings Limited is the parent entity of Shermin Finance Limited (hereafter ‘Shermin’). The acquisition of
Shermin expands the Group’s Home Experts offering through providing specialist point of sale finance brokering services.
Financial statements
HomeServe plc Annual Report & Accounts 2022
172
16. Acquisitions and Disposals (continued)
The provisional fair values of identifiable assets acquired, and liabilities assumed are set out in the table below:
At fair value
CET
£m
Grupo MH
£m
McLoughlin
£m
Other
£m
Total
£m
Property, plant and equipment
0.1
0.1
0.2
1.6
2.0
Right-of-use assets
0.4
0.4
0.1
2.7
3.6
Cash and cash equivalents
2.0
0.8
1.5
5.7
10.0
Inventories
—
0.4
—
2.7
3.1
Trade and other receivables
4.2
0.6
0.4
6.8
12.0
Trade and other payables, provisions & retirement benefit obligations
(5.9)
(0.9)
(0.6)
(8.1)
(15.5)
Deferred income
—
(2.3)
—
(1.3)
(3.6)
Lease liabilities
(0.4)
(0.4)
(0.1)
(2.7)
(3.6)
Bank & other loans
—
(0.2)
—
(1.2)
(1.4)
Intangible assets identified on acquisition
16.6
7.1
3.3
18.0
45.0
Deferred tax liabilities
(3.6)
(1.8)
(0.9)
(3.0)
(9.3)
Net assets acquired
13.4
3.8
3.9
21.2
42.3
Goodwill
40.5
14.0
9.5
32.3
96.3
Total
53.9
17.8
13.4
53.5
138.6
Satisfied by:
Cash
53.9
17.4
10.7
40.4
122.4
Deferred consideration
—
0.4
0.6
4.2
5.2
Contingent consideration at fair value
—
—
2.1
8.9
11.0
Total
53.9
17.8
13.4
53.5
138.6
Net cash outflow arising on acquisition:
Cash consideration
53.9
17.4
10.7
40.4
122.4
Less: cash acquired
(2.0)
(0.8)
(1.5)
(5.7)
(10.0)
Total
51.9
16.6
9.2
34.7
112.4
The information above is provisional with fair value assessment activities ongoing. The 'Other' column relates to 20 individually
immaterial business combinations completed during the year.
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.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
173
The post-acquisition revenue, adjusted operating profit and acquisition-related costs (included in operating costs) from these
acquisitions in the year ended 31 March 2022 were as follows:
CET
£m
Grupo MH
£m
McLoughlin
£m
Other
£m
Total
£m
Revenue
15.7
2.1
5.8
21.5
45.1
Adjusted operating profit
1.1
0.1
0.9
2.9
5.0
Acquisition-related costs
0.5
0.2
—
1.1
1.8
If all of the acquisitions had been completed on the first day of the financial year, Group revenues for the year would have been
£1,480.8m and Group adjusted profit before tax would have been £228.6m.
In addition to the net cash outflow on the acquisitions above of £112.4m, deferred and contingent consideration was paid relating to
previous business combinations of £18.4m (FY21: £3.6m).
Disposal of HomeServe Labs Limited
On 21 March 2022, HomeServe Assistance Limited (‘HAL’), a Group company, disposed of its 100% interest in HomeServe Labs Limited.
The total fair value of consideration was £4.9m. The net assets of the Group’s interest in the business at the date of the disposal were:
At fair value
£m
Total identifiable net liabilities
(0.1)
Gain on disposal
3.6
Transaction costs
1.4
Total
4.9
Satisfied by:
Cash
1.6
Interest in acquiror
1.8
Fair value of loan notes
1.5
Total
4.9
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents
1.6
Less: cash and cash equivalent balances disposed
—
Total
1.6
The loan notes receivable as consideration in this transaction represent an originated credit impaired financial asset under IFRS 9. They
have a face value of £6.4m and have been measured at a day one fair value of £1.5m. They will be subsequently measured at amortised
cost less any provision for impairment using the effective interest method.
As a result of the transaction, at 31 March 2022, HAL held a 19.99% interest in the acquiror, Spinnaker Acquisitions Plc, subsequently
renamed Ondo InsurTech Plc (‘Ondo’). The Group have assessed that HAL does not have significant influence over Ondo and as a result
the holding is to be accounted for as a non-controlling interest under IFRS 9. The Group has elected to classify the instrument as an
investment recorded at fair value through other comprehensive income. See note 17 and 27 for further details.
Disposal of Brazilian operations
On 30 June 2021, Habitissimo S.L disposed of its Brazilian operations to Juntos Somos Mais Fidelizacao S.A. for total consideration of
€1.8m/£1.6m, including cash of €1.6m/£1.4m recognising a net gain on disposal of €0.8m/£0.7m after the write off of intangible assets
and other associated disposal costs. The net gain on disposal is realised within Group operating profit.
Financial statements
HomeServe plc Annual Report & Accounts 2022
174
17. Other investments
Equity investments carried at fair value through other comprehensive income
£m
At 1 April 2020
5.6
Additions
2.9
Fair value gain on FVTOCI investment
4.6
Exchange movements
(0.2)
At 1 April 2021
12.9
Additions
1.6
Fair value loss on FVTOCI investments
(0.1)
Exchange movements
(0.1)
At 31 March 2022
14.3
On 21 March 2022, HomeServe Assistance Limited (‘HAL’), a Group company, disposed of 100% of its interest in HomeServe Labs
Limited (see note 16). As part of the total consideration HAL obtained a 19.99% holding in the acquiror, Spinnaker Acquisitions Plc,
subsequently renamed Ondo InsurTech Plc (‘Ondo’). The Group has elected to classify the investment at fair value through other
comprehensive income under IFRS 9. For the period from initial recognition to 31 March 2022 the change in fair value recorded in
other comprehensive income was a loss of £0.2m.
HomeServe France Holding SAS (‘HFH’), a Group company retained a 20% holding in Groupe Maison.fr SAS in May 2020, during FY22
the Group provided additional funding on an arm’s length basis in the form of a €3.7m loan facility of which €1.5m/£1.3m had been
drawn down at 31 March 2022. The majority shareholders also provided additional equity funding which reduced HFH shareholding
to 19.49%. The fair value of the equity investment has been assessed at 31 March 2022 by analysing the future outlook for the business.
The result of this reassessment increased the fair value of the investment by £0.1m.
At 31 March 2022 the fair value of the Group's investment held in a manufacturer of smart thermostat connected home technology
was held at the valuation indicated by the investee’s latest equity funding round (May 2021).
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.
Contributions to joint ventures
The Group made additional contributions to its joint venture investment in HomeServe Japan Corporation during the year of £3.6m
(FY21: £2.2m).
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. 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.
Subsequently in FY22, the fair value of the asset received in exchange for the 20% equity interest was finalised with an increase of
$1.0m/£0.8m, bringing the total asset to $2.1m/£1.6m. This resulted in an increase in the intangible asset recognised and a gain on
disposal of $1.0m/£0.8m being recorded in the income statement.
Acquisition of interest in associate
On 22 February 2021, HomeServe France Holding, a Group company, acquired a 20% holding in Mouse Holding SAS for €2,000.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
175
Summary Financial Information
The following amounts relate to the combined results of the Group’s joint venture interest in HomeServe Japan Corporation and
associate interests in (including Centriq until date of disposal):
2022
£m
2021
£m
Loss after tax
(6.8)
(5.5)
Total comprehensive expense
(6.8)
(5.5)
Amounts recognisable
(3.4)
(2.5)
19. Inventories
2022
£m
2021
£m
Consumables
20.4
12.2
20. Trade and other receivables
2022
£m
2021
£m
Amounts receivable for the provision of services
458.0
424.0
Other receivables
48.5
44.7
Accrued income
19.5
18.1
Prepayments
23.6
14.2
549.6
501.0
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 £45.5m (FY21: £34.5m) 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.
Financial statements
HomeServe plc Annual Report & Accounts 2022
176
20. Trade and other receivables (continued)
Ageing of balances past due net of expected credit losses:
2022
£m
2021
£m
1 - 30 days
21.6
19.3
31 - 60 days
14.9
7.9
61 - 90 days
3.7
2.5
91 days +
5.3
4.8
Balance at 31 March past due
45.5
34.5
Current/not yet due
412.5
389.5
At 31 March
458.0
424.0
Movement in expected credit losses:
2022
£m
2021
£m
At 1 April
5.9
3.8
Impairment losses recognised
3.5
2.4
Amounts written off
(2.7)
(1.7)
Amounts recovered
(0.1)
(0.3)
Business disposals
(0.4)
—
Business acquisitions
0.7
0.6
Transfers
—
1.2
Exchange movements
0.2
(0.1)
At 31 March
7.1
5.9
Of the provision total £nil relates to accrued income (FY21: £nil).
Ageing of impaired balances:
2022
£m
2021
£m
1 - 30 days
0.4
0.2
31 - 60 days
0.8
0.5
61 - 90 days
0.6
0.7
91 days +
3.7
2.4
Current/not yet due
1.6
2.1
At 31 March
7.1
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 2022 or 31 March 2021 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
2022
£m
2021
£m
Cash and cash equivalents in the Group balance sheet
174.5
171.4
Bank overdrafts
(17.0)
(22.0)
Cash and cash equivalents in the Group cash flow statement
157.5
149.4
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 £15.6m (FY21: £19.3m) 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.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
177
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.
22. Trade and other payables – current
2022
£m
2021
£m
Trade payables and accruals
172.6
158.9
Contingent consideration
11.0
17.0
Deferred consideration
5.9
4.0
Obligations under put options
4.7
24.6
Deferred income
66.6
62.2
Refund liabilities
26.5
23.6
Taxes and social security, excluding current tax
14.1
13.2
Amounts related to policyholders to be remitted to underwriters
83.7
82.1
Other payables
62.3
69.3
447.4
454.9
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 10.5% non-controlling interest in eLocal Holdings LLC,
following HomeServe USA Holding Corp’s initial 79% acquisition in FY20 and subsequent exercise of 10.5% of the options in FY22 (see
note 30 for further details). Put options classified as current are exercisable by the holder during July 2022.
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
2022
£m
2021
£m
Contingent consideration
14.5
12.8
Deferred consideration
6.4
6.8
Obligations under put options
14.3
9.7
Other non-current payables
1.6
2.5
36.8
31.8
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 10.5% non-controlling interest in eLocal Holdings LLC,
following HomeServe USA Holding Corp’s initial 79% acquisition in FY20 and subsequent exercise of 10.5% of the options in FY22 (see
note 30 for further details). Put options classified as non-current are exercisable by the holder between July 2023 and July 2025.
Financial statements
HomeServe plc Annual Report & Accounts 2022
178
24. Provisions
Movements in provisions during the years ended 31 March 2022 and 31 March 2021 are disclosed below:
Restructuring
costs
£m
Other
£m
Total
£m
At 1 April 2020
1.0
1.0
2.0
Created
1.1
5.5
6.6
Acquired on business acquisitions
—
0.1
0.1
Utilised
(1.7)
(1.9)
(3.6)
Released
(0.2)
(0.8)
(1.0)
Transferred
—
2.0
2.0
Foreign exchange
—
(0.1)
(0.1)
At 1 April 2021
0.2
5.8
6.0
Created
0.2
1.3
1.5
Acquired on business acquisitions
—
0.2
0.2
Utilised
(0.2)
(1.9)
(2.1)
Released
—
(0.4)
(0.4)
At 31 March 2022
0.2
5.0
5.2
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.
25. Borrowings
Bank and other loans
2022
£m
2021
£m
Sterling denominated
86.9
40.1
US dollar denominated
2.8
2.3
Euro denominated
11.2
11.6
Due within one year
100.9
54.0
Sterling denominated
225.6
242.8
US dollar denominated
344.8
280.5
Euro denominated
94.5
56.5
Due after one year
664.9
579.8
Total bank and other loans
765.8
633.8
Bank and other loans due within one year includes US Private Placements and bank facilities due within one year of £78.5m (FY21:
£26.4m), overdrafts in relation to our cash pooling arrangements of £17.0m (FY21: £22.0m) and interest due on borrowings of £5.4m
(FY21: £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.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
179
The weighted average interest rates paid on bank and other loans were as follows:
2022
2021
£
%
€
%
$
%
£
%
€
%
$
%
Fixed
3.1
—
4.0
3.2
—
4.1
Floating
2.1
1.6
1.6
1.2
1.1
1.2
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 15 October 2021 the Group completed a financing transaction in the United States Private Placement market, issuing notes
amounting to £30.0m with a fixed interest rate of 2.47%. The notes have a 6 year maturity from the date of issue.
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’ (FY21: 3.0 times) and ‘interest cover greater than 4.0 times EBITDA’ (FY21: 4.0 times). Interest is charged
at floating rates at margins of between 1.15% and 1.55% (FY21: 1.05% and 1.15%) above the relevant reference rate, thus exposing the
Group to cash flow and interest rate risk. At 31 March 2022, the Group had available £262.7m (FY21: £346.9m) of undrawn committed
borrowing facilities in respect of which all conditions precedent had been met.
• The Group has a £35m revolving credit facility with one bank. This facility was taken out on 20 November 2020 with an original
termination date of 19 November 2021. On 30 September 2021, the option was exercised to extend the facility by 6 months to 20
May 2022. The financial covenants associated with the facility are the same as the £400m revolving credit facility. Interest is charged
at a floating margin of 1.5% (FY21: 1.5%) above the relevant reference rate, thus exposing the Group to cash flow and interest rate risk.
At 31 March 2022, the Group had available £35.0m (FY21: £35.0m) 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 is
charged at a floating margin of 1.55% (FY21: 1.15%) above the relevant reference rate, thus exposing the Group to cash flow and
interest rate risk. At 31 March 2022, the Group had available £35.6m (FY21: £40.6m) of undrawn committed borrowing facilities in
respect of which all conditions precedent had been met.
• The Group has £530m of additional US Private Placements (FY21: £518m) consisting of: a combined £245m (FY21: £236m) USD and
GBP denominated notes taken out on 21 August 2020 at a weighted average interest of 3.41%, a combined £175m (FY21: £172m)
USD and GBP denominated notes taken out on 13 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 (FY21: £25m) short-term loan in FY22 through to July 2022. The financial covenants associated with the
facility are the same as the £400m revolving credit facility. Interest is charged at floating rates at margins of 1.10% (FY21: 1.10%) 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 $4.1m/£3.2m (FY21: $2.6m/£1.9m) was drawn at 31 March 2022. The weighted
average interest rate was 1.5% (FY21: 1.5%).
In addition to the core external borrowings listed above the Group is party to £8.3m (FY21: £4.2m) in financing arrangements for asset
purchases. The weighted average interest rate was 2.2% (FY21: 2.0%).
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) and with the cessation of GBP LIBOR the Group successfully negotiated to
transition to SONIA plus a credit adjustment spread. The facilities will continue to apply USD LIBOR where applicable until June 2023 at
which point it is expected that facilities will transition to SOFR based rates.
Financial statements
HomeServe plc Annual Report & Accounts 2022
180
25. Borrowings (continued)
Reconciliation of movements in liabilities arising from financing
Lease
liabilities
£m
Bank and
other loans
£m
Total
£m
At 1 April 2020
59.3
580.9
640.2
Proceeds from new loans and borrowings
—
243.4
243.4
Proceeds from additional borrowings on existing facilities
—
27.1
27.1
Repayment of borrowings
—
(214.6)
(214.6)
Repayment of lease principal
(14.8)
—
(14.8)
Interest paid
(1.4)
(18.2)
(19.6)
Costs associated with new bank and other loans raised
—
(2.2)
(2.2)
Total changes from cash flows
(16.2)
35.5
19.3
Non-cash movements
Foreign exchange
(2.6)
(33.4)
(36.0)
Interest expense
1.4
20.3
21.7
Additions
6.5
4.2
10.7
Disposals
(1.1)
—
(1.1)
Business acquisitions
4.0
4.3
8.3
Total changes from non-cash movements
8.2
(4.6)
3.6
Bank overdrafts included within bank and other loans
—
22.0
22.0
At 1 April 2021
51.3
633.8
685.1
Proceeds from new loans and borrowings
—
30.0
30.0
Proceeds from additional borrowings on existing facilities
—
123.2
123.2
Repayment of borrowings
—
(39.9)
(39.9)
Repayment of overdrafts
—
(5.0)
(5.0)
Repayment of lease principal
(14.7)
—
(14.7)
Interest paid
(1.2)
(22.5)
(23.7)
Costs associated with new bank and other loans raised
—
(0.3)
(0.3)
Total changes from cash flows
(15.9)
85.5
69.6
Non-cash movements
Foreign exchange
0.6
14.8
15.4
Interest expense
1.2
24.2
25.4
Additions
11.7
6.1
17.8
Disposals
(1.0)
—
(1.0)
Business acquisitions
3.6
1.4
5.0
Total changes from non-cash movements
16.1
46.5
62.6
At 31 March 2022
51.5
765.8
817.3
Analysed as:
Non-current
15.2
100.9
116.1
Current
36.3
664.9
701.2
At 31 March 2022
51.5
765.8
817.3
A maturity analysis of the contractual undiscounted cash flows associated with lease liabilities and bank and other loans is provided in
note 27.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
181
26. Leasing
Information about leases for which the Group is a lessee is presented below.
Right-of-use assets
Properties
£m
Motor vehicles
£m
Other
£m
Total
£m
Cost
At 1 April 2020
53.6
20.3
0.2
74.1
Additions
2.8
3.6
0.1
6.5
Disposals
(1.6)
(1.1)
—
(2.7)
Acquisitions of subsidiaries
3.5
0.5
—
4.0
Exchange movements
(3.0)
(0.7)
—
(3.7)
At 1 April 2021
55.3
22.6
0.3
78.2
Additions
3.4
8.3
—
11.7
Disposals
(1.5)
(2.7)
—
(4.2)
Acquisitions of subsidiaries
3.2
0.4
—
3.6
Exchange movements
0.9
0.3
—
1.2
At 31 March 2022
61.3
28.9
0.3
90.5
Accumulated depreciation
At 1 April 2020
8.6
8.6
0.1
17.3
Charge for the year
9.5
5.6
0.1
15.2
Disposals
(0.6)
(1.0)
—
(1.6)
Exchange movements
(0.8)
(0.5)
—
(1.3)
At 1 April 2021
16.7
12.7
0.2
29.6
Charge for the year
9.8
5.3
—
15.1
Disposals
(0.5)
(2.6)
—
(3.1)
Exchange movements
0.4
0.2
—
0.6
At 31 March 2022
26.4
15.6
0.2
42.2
Carrying amount
At 31 March 2022
34.9
13.3
0.1
48.3
At 31 March 2021
38.6
9.9
0.1
48.6
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 27. The total cash outflow for leases for the year
ended 31 March 2022 was £15.9m (FY21: £16.2m), representing £14.7m (FY21: £14.8m) of principal repayments and £1.2m (FY21: £1.4m)
of interest charges on outstanding lease liabilities (see note 25).
Financial statements
HomeServe plc Annual Report & Accounts 2022
182
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.
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 financial instruments at fair value:
2022
£m
2021
£m
Level 1
Assets classified as fair value through other comprehensive income
Other investments (note 17)
1.4
—
Level 2
Assets classified as fair value through other comprehensive income
Other investments (note 17)
12.9
12.9
Level 3
Assets classified as fair value through profit and loss
Other financial assets
0.9
1.2
Contingent consideration at fair value through profit and loss
Current liabilities
11.0
17.0
Non-current liabilities
14.5
12.8
The Group uses the following methods to estimate fair value of its financial instruments:
Financial Instrument
Level
Valuation method
Other financial assets
1
Quoted bid price in an active market
Other investments
2
Discounted cashflows at current market rates
Other financial assets
3
Black Scholes model and discounted cashflows at current market rates
Contingent consideration
3
Discounted cashflows at current market rates
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
183
The table below presents a reconciliation of recurring Level 3 fair value measurements:
2022
2021
Other financial
assets
£m
Contingent
consideration
£m
Other financial
assets
£m
Contingent
consideration
£m
At 1 April
1.2
29.8
—
11.4
Additions (note 16)
—
11.0
1.2
20.4
Payments
—
(14.6)
—
(1.1)
Re-measurement adjustment related to
prior year acquisition
—
—
—
1.0
Unwinding of discount rate through the income statement
—
0.6
—
0.6
Other movements
—
0.2
—
(0.3)
Fair value re-measurements
(0.3)
(2.5)
0.1
—
Foreign exchange
—
1.0
(0.1)
(2.2)
At 31 March
0.9
25.5
1.2
29.8
The inputs used to derive the asset fair values 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 £0.4m/decrease by £0.1m
(FY21: 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 (FY21: £0.1m).
If discount rates on contingent consideration were higher/lower than the Group’s historical experience by 10%, the carrying amount
would increase/decrease by £0.1m (FY21: £0.1m). The undiscounted range of outcomes associated with the contingent consideration
payments has a floor of £0.8m (FY21: £1.6m). 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.
Other financial assets – Level 3
HomeServe France Holding SAS (“HFH”) call option over equity in Maison.fr
As a result of the disposal, on 15 May 2020, of an 80% interest in HomeServe Home Experts SAS (subsequently renamed Groupe Maison.
fr), HFH acquired a call option, initially exercisable in April 2022, providing the opportunity to acquire a further 23.73% equity stake of
Groupe Maison.fr SAS for a fixed price of €3.7m/£3.3m. On 26 November 2021 the option term was amended and the instrument is now
exercisable in December 2022 with no other changes in terms. 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 31 March 2022 was £0.9m (FY21: £1.2m). During FY22 the change in fair value before the impact of foreign
exchange was a charge of £0.3m (FY21: £0.1m charge).
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 2022 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.
Financial statements
HomeServe plc Annual Report & Accounts 2022
184
27. Financial instruments (continued)
Other financial assets – held at amortised cost
Ondo InsurTech Plc (“Ondo”) loan notes
As a result of the disposal of HomeServe Labs Limited, HomeServe Assistance Limited (‘HAL’), a Group company, obtained loan
notes in Ondo as part of the total consideration. They represent an originated credit impaired financial asset under IFRS 9 and have
been measured at a day one fair value of £1.5m. The loan notes are subsequently measured at amortised cost less any provision for
impairment using the effective interest method. The carrying value at 31 March 2022 was £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:
2022
£m
2021
£m
Attributable to equity holders of the parent
627.6
564.0
Cash and cash equivalents
174.5
171.4
Bank and other loans
765.8
633.8
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.
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).
2022
2021
Increase in cost of borrowing
100bps
100bps
Reduction in profit before tax (£m)
1.8
0.7
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
185
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.
Bank and
other loans
£m
Trade
payables
£m
Other
payables
£m
Deferred and
contingent
consideration
£m
Lease
liabilities
£m
Obligations
under put
options
£m
Total
£m
2022
Under 2 months
20.2
104.9
63.5
0.4
2.5
—
191.5
Between 2 and 12 months
97.7
67.7
123.2
17.6
13.2
4.8
324.2
Between 1 and 2 years
23.9
0.6
0.5
6.0
13.2
17.6
61.8
Between 2 and 5 years
320.2
—
0.1
12.3
19.5
—
352.1
After 5 years
436.4
0.3
—
5.0
6.3
—
448.0
Total
898.4
173.5
187.3
41.3
54.7
22.4
1,377.6
Bank and
other loans
£m
Trade
payables
£m
Other
payables
£m
Deferred and
contingent
consideration
£m
Lease
liabilities
£m
Obligations
under put
options
£m
Total
£m
2021
Under 2 months
24.6
97.2
39.3
6.1
2.5
—
169.7
Between 2 and 12 months
44.4
61.7
109.9
17.0
11.6
26.7
271.3
Between 1 and 2 years
72.2
0.1
1.5
3.9
12.1
—
89.8
Between 2 and 5 years
229.5
0.1
0.1
10.9
20.6
15.8
277.0
After 5 years
405.3
0.7
—
6.5
7.7
—
420.2
Total
776.0
159.8
150.8
44.4
54.5
42.5
1,228.0
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.
28. Share capital
2022
£m
2021
£m
Issued and fully paid 336,471,082 ordinary shares of 2 9/13p each (FY21: 336,045,030)
9.1
9.1
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 2021 to 31 March 2022 the Company issued 426,052 shares with a nominal value of 2 9/13p creating share
capital and share premium with a combined value of £2.9m.
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.
Financial statements
HomeServe plc Annual Report & Accounts 2022
186
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 (FY21: 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:
Capital redemption
reserve
£m
Merger
reserve
£m
Own shares
reserve
£m
Total other
reserves
£m
At 1 April 2020, 1 April 2021 and 31 March 2022
1.2
81.0
(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 were repurchased or transferred to individuals to satisfy awards (FY21: nil).
30. Non-controlling interests
On 8 September 2021, the non-controlling shareholders of eLocal LLC exercised put options to sell 50% of their 21% non-controlling
interest in eLocal LLC for cash consideration of $25.1m/£18.2m to HomeServe USA Holding Corp. The transaction increased HomeServe
USA Holding Corp interest in eLocal to 89.5% of the issued share capital. On extinguishment of the exercised options, $7.0m/£5.2m
of the non-controlling interest was derecognised against equity attributable to the parent. Options over the remaining 10.5% minority
equity instruments are exercisable between July 2022 and July 2025.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
187
Summarised financial information in respect of the Group’s non-controlling interests is set out below. In FY22, this relates to the 10.5%
(FY21: 21%) non-controlling interest in eLocal USA Holdings LLC. The summarised financial information below represents amounts
before intra-group eliminations.
2022
£m
2021
£m
Current assets
18.9
12.1
Non-current assets
44.7
52.1
Current liabilities
(9.8)
(14.7)
Non-current liabilities
(3.9)
(3.5)
Equity attributable to owners of the Company
49.9
46.0
Non-controlling interests
5.2
9.7
31. Notes to the cash flow statement
Notes
2022
£m
2021
£m
Operating profit
202.6
71.8
Adjustments for:
Depreciation of property, plant and equipment
15
10.3
9.9
Depreciation of right-of-use assets
26
15.1
15.2
Amortisation of acquisition intangible assets
14
44.9
45.0
Amortisation of other intangible assets
14
38.2
44.4
Amortisation of contract costs
4
5.6
9.0
Share-based payments expense
5.2
4.3
Share of equity accounted investees results
3.4
2.5
Fair value movements on options and contingent consideration
(3.7)
2.3
Costs of put options on non-controlling interests accrued over time
2.7
2.8
(Gain)/loss on disposal of associate
18
(0.8)
2.1
(Gain)/loss on disposal of businesses
16
(4.3)
0.1
(Gain)/loss on disposal of property, plant and equipment, intangible assets and contract costs
(6.0)
1.1
Other non-cash movements
0.5
—
Non-exceptional impairment of goodwill, intangible assets and contract costs
—
0.1
Exceptional impairment charges and associated costs
7
—
86.9
Other exceptional items
—
5.3
Operating cash flows before movements in working capital
313.7
302.8
Increase in inventories
(4.9)
(0.8)
Increase in receivables
(26.1)
(20.0)
Decrease in payables and provisions
(10.2)
(4.3)
Net movement in working capital
(41.2)
(25.1)
Cash generated by operations
272.5
277.7
Income taxes paid
(40.6)
(35.1)
Interest paid (inclusive of payments on lease liabilities and non-bank interest)
(24.3)
(19.6)
Net cash inflow from operating activities
207.6
223.0
Financial statements
HomeServe plc Annual Report & Accounts 2022
188
32. Share-based payments
During the year ended 31 March 2022, the Group had three (FY21: three) 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) 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.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
189
LTIP
SVCP
One Plan
2022
Number
Outstanding at 1 April 2021
2,989,500
2,140,337
105,624
Granted
1,502,123
794,688
164,617
Lapsed
(711,251)
—
—
Forfeited
(145,624)
(66,258)
(25,426)
Exercised
(433,129)
—
(33,951)
Outstanding at 31 March 2022
3,201,619
2,868,767
210,864
Exercisable at 31 March 2022
747
—
—
Exercise price of options outstanding at 31 March 2022
£0.00
£0.00
£0.00
Weighted average remaining contractual life
2
3
2
Weighted average fair value of options granted
£7.61
£9.61
£8.76
LTIP
SVCP
One Plan
2021
Number
Outstanding at 1 April 2020
3,370,593
1,246,661
104,191
Granted
913,578
1,444,241
51,156
Lapsed
—
—
—
Forfeited
(56,769)
(550,565)
(14,806)
Exercised
(1,237,902)
—
(34,917)
Outstanding at 31 March 2021
2,989,500
2,140,337
105,624
Exercisable at 31 March 2021
107,877
—
—
Exercise price of options outstanding at 31 March 2021
£0.00
£0.00
£0.00
Weighted average remaining contractual life
2
3
2
Weighted average fair value of options granted
£11.20
£12.95
£11.81
The weighted average share price at the date of exercise for share options exercised during the year was £9.87 (FY21: £12.96).
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 (which are comparable to the prior year) are as
follows:
Input
Assumption
Share price
Price at date of grant
Exercise price
Per scheme rules
Expected volatility
22% - 35%
Option life
Per scheme rules
Expected dividends
Based on historic dividend yield
Risk free interest rate
0.0% - 0.6%
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 FY22 the Group
recognised an IFRS 2 charge of £5.2m (FY21: £4.3m) related to equity-settled share-based payment transactions.
Financial statements
HomeServe plc Annual Report & Accounts 2022
190
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 £8.1m (FY21: £7.4m) represents contributions payable to the schemes by the Group at rates specified
in the rules of the schemes. At 31 March 2022, contributions of £0.9m (FY21: £0.9m) 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 17 years (FY21: 19 years). The estimated costs for the GMP equalisation were fully
reflected in the scheme in FY20.
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 IAS19. Re-measurements are recognised immediately through other comprehensive income.
Valuation at
2022
2021
Key assumptions used:
Discount rate at 31 March
2.8%
2.1%
Consumer price inflation
3.5%
3.0%
Retail price inflation
3.9%
3.5%
Expected rate of salary increases
3.5%
3.0%
Future pension increases
3.5%
3.0%
Life expectancy of female aged 60 at balance sheet date
29.2yrs
29.2yrs
Life expectancy of male aged 60 at balance sheet date
27.2yrs
27.5yrs
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.
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
2022, all other things being equal:
£m
Price inflation -1%
(5.5)
Price inflation +1%
6.4
Discount rate -1%
6.5
Discount rate +1%
(5.4)
Life expectancy -1 year
(1.1)
Life expectancy +1 year
1.1
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
191
Amounts recognised in the income statement in respect of the WCPS defined benefit scheme are as follows:
2022
£m
2021
£m
Current service cost and section expenses
0.2
0.2
Interest income
(0.2)
(0.3)
—
(0.1)
The actual return on scheme assets was a gain of £2.5m (FY21: gain of £4.0m). 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:
2022
£m
2021
£m
Present value of defined benefit obligations
(34.8)
(35.7)
Fair value of scheme assets
49.1
44.0
Surplus in scheme recognised in the balance sheet in non-current assets
14.3
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:
2022
£m
2021
£m
At 1 April
35.7
27.1
Employer's part of the current service cost
0.1
0.2
Interest cost
0.7
0.7
Actuarial (gains)/losses due to:
Changes in financial assumptions
(2.1)
8.5
Changes in demographic assumptions
(0.1)
0.1
Experience adjustments on benefit obligations
1.1
(0.2)
Benefits paid
(0.6)
(0.7)
At 31 March
34.8
35.7
Movements in the fair value of WCPS scheme assets were as follows:
2022
£m
2021
£m
At 1 April
44.0
37.4
Interest on Section assets
1.0
1.0
Section expenses
(0.1)
—
Actual return less interest on Section assets
2.5
4.0
Contributions from the employer
2.3
2.3
Benefits paid
(0.6)
(0.7)
At 31 March
49.1
44.0
The amount recognised outside the income statement in the statement of comprehensive income for FY22 is a gain of £3.6m (FY21: loss
of £4.4m). The cumulative amount recognised outside the income statement at 31 March 2022 is a loss of £4.8m (FY21: loss of £8.4m).
Financial statements
HomeServe plc Annual Report & Accounts 2022
192
33. Retirement benefit schemes (continued)
Defined benefit schemes (continued)
Water Companies Pension Scheme (WCPS) (continued)
The analysis of the fair value of WCPS scheme assets at the balance sheet date was as follows:
2022
£m
2021
£m
Equity instruments
19.7
17.7
Diversified growth funds
5.0
4.8
Liability driven investment funds
15.2
12.8
Buy and maintain credit funds
8.2
—
Liquidity funds
0.7
—
Absolute return bonds
—
8.6
Cash
0.3
0.1
49.1
44.0
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 £1.1m (FY22: 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.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
193
Re-measurement of the Group’s IFC obligations was performed at 31 March in accordance with IAS 19 using the following assumptions:
Valuation at
2022
2021
Key assumptions used:
Discount rate at 31 March
1.6%
0.7%
Employer social charges
37 - 55%
37 - 55%
Employee turnover rate
14.2%
14.2%
Expected rate of salary increases
1.0 - 1.5%
1.0 - 1.5%
Mortality rates
INSEE 2021
INSEE 2019
Legal retirement age
60 - 67yrs
60 - 67yrs
The following table illustrates the sensitivity of IFC obligations to reasonably possible changes in discount rates at 31 March 2022, all
other things being equal:
£m
Discount rate -0.5%
0.1
Discount rate +0.5%
(0.1)
Amounts recognised in the income statement, within operating costs, in respect of the IFC schemes were a credit of £0.3m, (FY21:
£0.1m charge), principally related to current service costs.
Movements in the present value of IFC defined benefit obligations were as follows:
2022
£m
2021
£m
At 1 April
1.2
1.0
Employer’s part of the current service cost
(0.3)
0.1
Acquisition of subsidiaries
—
0.1
Actuarial (gains)/losses due to changes in financial assumptions
(0.1)
0.1
Foreign exchange
—
(0.1)
At 31 March
0.8
1.2
The amount recognised outside the income statement in the statement of comprehensive income for FY22 is a gain of £0.1m (FY21: loss
of £0.1m). The cumulative amount recognised outside the income statement at 31 March 2022 is £nil (FY21: loss of £0.1m).
The estimated amounts of contributions expected to be paid to the scheme during the forthcoming financial year is £nil (FY22 actual:
£nil).
Financial statements
HomeServe plc Annual Report & Accounts 2022
194
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
2022
£m
2021
£m
Purchases from associates
—
0.3
Sales to joint ventures
0.2
0.1
Loan due from investee (see note 17)
1.3
—
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 £0.1m (FY21: £nil) 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 (FY22: £0.1m, FY21: £nil) and Centreline AV Limited
(FY22: £33,000, FY21: £29,000). Amounts outstanding to all these companies on 31 March 2022 amounted to £nil (FY21: £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.
2022
£m
2021
£m
Short-term employee benefits
10.4
12.2
Post-employment benefits
0.3
0.4
Other long-term employee benefits
1.2
1.5
Share-based payments expense
2.9
1.3
Termination benefits
—
4.4
14.8
19.8
Except as noted above, there were no other transactions with Directors requiring disclosure.
Notes to financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
195
35. Post balance sheet events
Recommended cash offer for HomeServe
On 19 May 2022, Brookfield Infrastructure announced a recommended cash offer for the entire issued, and to be issued share capital of
the Company, to be effected by means of a court approved scheme of arrangement under Part 26 of the UK Companies Act 2006. The
proposed acquisition is subject to shareholder approval, approval of the courts and approval from a number of regulatory authorities.
Disposal of Piedmont policy book
On 10 December 2021, HomeServe USA Corp (‘HSUSA’) entered into an agreement to sell the book of policies built up during the affinity
partnership to Piedmont Natural Gas Company, Inc. (‘Piedmont’) ahead of the affinity partnership ending in April 2022. HSUSA disposed
of the policy book in two tranches, the first tranche completing in March 2022 and the second tranche in April 2022. As anticipated
tranche two of the transaction completed in April 2022. The Group received $11.6m/£8.8m of cash consideration, derecognised
intangible assets of $0.5m/£0.4m, receivables of $5.4m/£4.1m and payables of $1.7m/£1.3m relating to commissions and underwriter
payables. This resulted in an initial gain on disposal of £5.6m being recorded in the income statement. The gain will be finalised following
the completion of the post close cash collection process on transferred accounts receivable balances during July.
Financial statements
HomeServe plc Annual Report & Accounts 2022
196
Notes
2022
£m
2021
£m
Profit for the year
105.8
90.7
Items that will not be reclassified subsequently to profit and loss:
Actuarial gain/(loss) on defined benefit pension scheme
33
3.6
(4.4)
Deferred tax (charge)/credit relating to actuarial re-measurements
43
(0.9)
0.8
Total other comprehensive income/(expense)
2.7
(3.6)
Total comprehensive income for the year
108.5
87.1
Company statement of comprehensive income
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
197
Company balance sheet
31 March 2022
Notes
2022
£m
2021
£m
Non-current assets
Other intangible assets
38
4.1
3.0
Property, plant and equipment
39
0.4
0.5
Right-of-use assets
45
1.1
1.3
Investment in subsidiaries
40
954.9
954.6
Amounts receivable from Group Companies
40
—
4.9
Retirement benefit assets
33
14.3
8.3
974.8
972.6
Current assets
Trade and other receivables
41
217.6
72.8
Current tax asset
0.3
1.7
Cash and cash equivalents
41
32.5
25.4
250.4
99.9
Total assets
1,225.2
1,072.5
Current liabilities
Trade and other payables
42
(13.4)
(15.8)
Bank and other loans
44
(82.5)
(39.1)
Lease liabilities
45
(0.5)
(0.5)
(96.4)
(55.4)
Net current assets
154.0
44.5
Non-current liabilities
Bank and other loans
44
(663.2)
(577.8)
Lease liabilities
45
(0.6)
(0.9)
Deferred Tax liabilities
43
(2.7)
(0.3)
(666.5)
(579.0)
Total liabilities
(762.9)
(634.4)
Net assets
462.3
438.1
Equity
Share capital
28
9.1
9.1
Share premium account
29
199.3
196.4
Merger reserve
29
81.0
81.0
Share incentive reserve
47
18.4
16.5
Capital redemption reserve
29
1.2
1.2
Retained earnings
153.3
133.9
Total equity
462.3
438.1
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 £105.8m (FY21: £90.7m).
The financial statements of HomeServe plc were approved by the Board of Directors and authorised for issue on 24 May 2022. They
were signed on its behalf by:
David Bower
Chief Financial Officer
24 May 2022
Registered in England No. 2648297
Financial statements
HomeServe plc Annual Report & Accounts 2022
198
Share
capital
£m
Share
premium
account
£m
Merger
reserve
£m
Share
incentive
reserve
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 April 2021
9.1
196.4
81.0
16.5
1.2
133.9
438.1
Profit for the year
—
—
—
—
—
105.8
105.8
Other comprehensive income
—
—
—
—
—
2.7
2.7
Total comprehensive income
—
—
—
—
—
108.5
108.5
Dividends paid (note 11)
—
—
—
—
—
(89.3)
(89.3)
Issue of share capital
—
2.9
—
—
—
—
2.9
Share-based payments
—
—
—
4.8
—
—
4.8
Share options exercised
—
—
—
(2.9)
—
—
(2.9)
Tax on exercised share options
—
—
—
—
—
0.1
0.1
Deferred tax on share options
—
—
—
—
—
0.1
0.1
Balance at 31 March 2022
9.1
199.3
81.0
18.4
1.2
153.3
462.3
Year ended 31 March 2021
Share
capital
£m
Share
premium
account
£m
Merger
reserve
£m
Share
incentive
reserve
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 1 April 2020
9.0
189.3
81.0
19.8
1.2
127.2
427.5
Profit for the year
—
—
—
—
—
90.7
90.7
Other comprehensive expense
—
—
—
—
—
(3.6)
(3.6)
Total comprehensive income
—
—
—
—
—
87.1
87.1
Dividends paid (note 11)
—
—
—
—
—
(80.5)
(80.5)
Issue of share capital
0.1
7.1
—
—
—
—
7.2
Share-based payments
—
—
—
3.8
—
—
3.8
Share options exercised
—
—
—
(7.1)
—
—
(7.1)
Tax on exercised share options
—
—
—
—
—
0.5
0.5
Deferred tax on share options
—
—
—
—
—
(0.4)
(0.4)
Balance at 31 March 2021
9.1
196.4
81.0
16.5
1.2
133.9
438.1
Company statement of changes in equity
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
199
Company cash flow statement
Year ended 31 March 2022
Notes
2022
£m
2021
£m
Net cash outflow from operating activities
48
(169.8)
(77.9)
Investing activities
Interest received
3.3
1.4
Dividends received from subsidiary undertakings
152.6
99.8
Purchases of intangible assets
(1.8)
(0.4)
Purchases of tangible assets
—
(0.1)
Investment in subsidiary undertaking
—
(45.0)
Net cash inflow from investing activities
154.1
55.7
Financing activities
Dividends paid
11
(89.3)
(80.5)
Repayment of lease principal
45
(0.5)
(0.4)
New bank and other loans raised
44
34.9
247.6
Costs associated with new bank and other loans raised
44
(0.3)
(2.2)
Proceeds from loans and borrowings
44
123.2
27.1
Repayment of loans and borrowings
44
(36.8)
(213.3)
Net cash generated by/(used in) financing activities
31.2
(21.7)
Net movement in cash and cash equivalents, net of bank overdrafts
15.5
(43.9)
Cash and cash equivalents, net of bank overdrafts at the beginning of the year
16.9
60.9
Effect of foreign currency exchange rate changes
0.1
(0.1)
Cash and cash equivalents, net of bank overdrafts, at the end of the year
41
32.5
16.9
Financial statements
HomeServe plc Annual Report & Accounts 2022
200
Company only
The following notes 36 to 50 relate to the Company only position and performance for the year ended 31 March 2022.
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 £105.8m (FY21: £90.7m).
The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the
separate financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the
United Kingdom, and are presented in Pounds Sterling.
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 (FY21: 249,975) are in trust to satisfy obligations under share options
schemes and are recognised at cost £3m (FY21: £3m).
None of the critical accounting judgements and key sources of estimation uncertainty disclosed in note 3 apply to the Company. 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:
2022
number
2021
number
UK (all administrative roles)
97
91
2022
£m
2021
£m
Their aggregate remuneration comprised:
Wages and salaries
11.8
12.3
Social security costs
1.6
1.6
Other pension costs (note 33)
0.3
0.4
13.7
14.3
Audit fees
2022
£000
2021
£000
Fees payable to the Company’s auditor for the audit of the Company’s
financial statements
312
202
Total audit fees
312
202
Notes to Company financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
201
38. Other intangible assets
Trademarks &
access rights
£m
Software
£m
Total
intangibles
£m
Cost
At 1 April 2020
2.9
5.4
8.3
Additions
—
0.9
0.9
Disposals
—
(0.3)
(0.3)
At 1 April 2021
2.9
6.0
8.9
Additions
—
1.6
1.6
Disposals
—
(0.2)
(0.2)
At 31 March 2022
2.9
7.4
10.3
Accumulated amortisation
At 1 April 2020
2.1
3.5
5.6
Charge for the year
0.1
0.5
0.6
Disposals
—
(0.3)
(0.3)
At 1 April 2021
2.2
3.7
5.9
Charge for the year
—
0.5
0.5
Disposals
—
(0.2)
(0.2)
At 31 March 2022
2.2
4.0
6.2
Carrying amount
At 31 March 2022
0.7
3.4
4.1
At 31 March 2021
0.7
2.3
3.0
Financial statements
HomeServe plc Annual Report & Accounts 2022
202
39. Property, plant and equipment
Leasehold
improvements
£m
Computer
equipment
£m
Motor
Vehicles
£m
Total
tangible assets
£m
Cost
At 1 April 2020
0.6
0.2
0.1
0.9
Additions
—
0.1
—
0.1
At 1 April 2021
0.6
0.3
0.1
1.0
Additions
—
0.1
—
0.1
Disposals
—
(0.1)
—
(0.1)
At 31 March 2022
0.6
0.3
0.1
1.0
Accumulated depreciation
At 1 April 2020
0.2
0.1
—
0.3
Charge for the year
0.1
0.1
—
0.2
At 1 April 2021
0.3
0.2
—
0.5
Charge for the year
0.1
0.1
—
0.2
Disposals
—
(0.1)
—
(0.1)
At 31 March 2022
0.4
0.2
—
0.6
Carrying amount
At 31 March 2022
0.2
0.1
0.1
0.4
At 31 March 2021
0.3
0.1
0.1
0.5
40. Subsidiaries
Details of the Company’s subsidiaries at 31 March 2022, including the name, address, country of incorporation and proportion of
ownership interest is given in note 50.
Investments in subsidiaries
£m
Cost and net book value
At 1 April 2020
909.6
Additions
45.0
At 1 April 2021
954.6
Additions
0.3
At 31 March 2022
954.9
The addition during the year of £0.3m relates to a contribution to the French business in relation to the HomeServe plc LTIP scheme.
Notes to Company financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
203
The addition in the prior year of £45.0m related to an injection of capital of £45.0m 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
2022
£m
2021
£m
Amounts receivable from Group Companies (note 50)
—
4.9
The amounts receivable from Group Companies of £nil (FY21: £4.9m) represented 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.
41. Financial assets
Trade and other receivables
2022
£m
2021
£m
Amounts receivable from Group companies (note 50)
213.7
71.5
Other receivables
1.5
1.1
Prepayments and accrued income
2.4
0.2
217.6
72.8
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:
2022
£m
2021
£m
Current
213.7
71.5
At 31 March
213.7
71.5
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 £32.5m (FY21: £25.4m) 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 £32.5m (FY21: £16.9m) 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.
Financial statements
HomeServe plc Annual Report & Accounts 2022
204
42. Financial liabilities
Trade and other payables
2022
£m
2021
£m
Amounts payable to Group companies (note 50)
0.1
—
Trade payables and accruals
12.1
14.7
Taxes and social security, excluding corporation tax
1.2
1.1
13.4
15.8
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit
period taken for trade purchases is 18 days (FY21: 9 days).
The Directors consider that the carrying amount of trade payables approximates to their fair value.
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
Total
£m
At 1 April 2020
(1.9)
1.6
0.2
(0.1)
(Charge)/credit to income
(0.5)
(0.3)
0.2
(0.6)
Charge to equity
—
(0.4)
—
(0.4)
Credit to comprehensive income
0.8
—
—
0.8
At 1 April 2021
(1.6)
0.9
0.4
(0.3)
Charge to income
(1.0)
(0.3)
(0.3)
(1.6)
Credit to equity
—
0.1
—
0.1
Charge to comprehensive income
(0.9)
—
—
(0.9)
At 31 March 2022
(3.5)
0.7
0.1
(2.7)
44. Bank and other loans
2022
£m
2021
£m
Bank and other loans
82.5
39.1
Due within one year
82.5
39.1
Bank and other loans
663.2
577.8
Due after one year
663.2
577.8
Total bank and other loans
745.7
616.9
Bank and other loans due within one year of £82.5m (FY21: £39.1m) includes bank facilities and Private Placements due within one year
of £75m (FY21: £25m), bank overdrafts of £nil (FY21: £8.5m), accrued interest of £5.2m (FY21: £4.7m) and other loans of £2.3m (FY21:
£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 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 statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
205
Reconciliation of movements in liabilities arising from financing
Bank and other loans
£m
At 1 April 2020
580.4
New bank and other loans raised
247.6
Proceeds from loans and borrowings
27.1
Repayment of loans and borrowings
(213.3)
Interest paid
(18.1)
Costs associated with new bank and other loans raised
(2.2)
Total changes from cash flows
41.1
Non-cash movements
Foreign exchange
(33.4)
Interest expense
20.3
Total changes from non-cash movements
(13.1)
Bank overdrafts included within bank and other loans
8.5
At 1 April 2021
616.9
New bank and other loans raised
34.9
Proceeds from loans and borrowings
123.2
Repayment of loans and borrowings
(36.8)
Repayment of overdraft
(8.5)
Interest paid
(22.5)
Costs associated with new bank and other loans raised
(0.3)
Total changes from cash flows
90.0
Non-cash movements
Foreign exchange
14.6
Interest expense
24.2
Total changes from non-cash movements
38.8
At 31 March 2022
745.7
Analysed as:
Non-current
663.2
Current
82.5
At 31 March 2022
745.7
Financial statements
HomeServe plc Annual Report & Accounts 2022
206
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 2022.
Right-of-use assets
Properties
£m
Motor vehicles
£m
Total
£m
Cost
At 1 April 2020
1.8
0.1
1.9
Additions
—
0.2
0.2
Disposals
(0.2)
—
(0.2)
At 1 April 2021
1.6
0.3
1.9
Additions
—
0.3
0.3
At 31 March 2022
1.6
0.6
2.2
Accumulated depreciation
At 1 April 2020
0.3
—
0.3
Charge for the year
0.4
—
0.4
Disposals
(0.1)
—
(0.1)
At 1 April 2021
0.6
—
0.6
Charge for the year
0.3
0.2
0.5
At 31 March 2022
0.9
0.2
1.1
Carrying amount
At 31 March 2022
0.7
0.4
1.1
At 31 March 2021
1.0
0.3
1.3
Lease liabilities
2022
£m
2021
£m
Leases
0.5
0.5
Due within one year
0.5
0.5
Leases
0.6
0.9
Due after one year
0.6
0.9
Total lease liabilities
1.1
1.4
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 2022 was £0.5m (FY21: £0.4m) representing £0.5m (FY21: £0.4m) of principal repayments
and £nil of interest charges in both years. Non-cash movements on leases include additions of £0.2m (FY21: £0.2m) and interest expense
of £nil (FY21: £0.1m).
Notes to Company financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
207
46. Financial instruments
The tables below set out the classification of financial instruments in the statement of financial position:
Financial assets
2022
£m
2021
£m
Amortised cost
247.7
102.9
Financial liabilities
2022
£m
2021
£m
Other financial liabilities at amortised cost
759.0
633.0
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:
2022
£m
2021
£m
Shareholders’ funds
462.3
438.1
Cash and cash equivalents
32.5
25.4
Bank and other loans
745.7
616.9
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.
Assets
Liabilities
2022
£m
2021
£m
2022
£m
2021
£m
Euro
65.1
37.3
(93.4)
(63.3)
US dollar
4.8
6.7
(346.7)
(286.3)
Financial statements
HomeServe plc Annual Report & Accounts 2022
208
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.
2022
2021
Increase in £:$ exchange rate:
10%
10%
Effect on profit after tax (£m)
25.2
20.6
Effect on equity (£m)
25.2
20.6
Increase in £:€ exchange rate:
10%
10%
Effect on profit after tax (£m)
2.1
1.9
Effect on equity (£m)
2.1
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.
Lease liabilities
£m
Bank and
other loans
£m
Trade, other and
Group payables
£m
Total
£m
2022
Under 2 months
—
3.1
7.7
10.8
Between 2 and 12 months
0.5
96.4
4.5
101.4
Between 1 and 2 years
0.5
22.6
—
23.1
Between 2 and 5 years
0.2
319.7
—
319.9
Over 5 years
—
436.4
—
436.4
Total
1.2
878.2
12.2
891.6
Lease liabilities
£m
Bank and
other loans
£m
Trade, other and Group
payables
£m
Total
£m
2021
Under 2 months
—
10.6
5.5
16.1
Between 2 and 12 months
0.5
43.6
9.2
53.3
Between 1 and 2 years
0.5
70.7
—
71.2
Between 2 and 5 years
0.5
229.0
—
229.5
Over 5 years
—
405.2
—
405.2
Total
1.5
759.1
14.7
775.3
It is, and has been throughout the year under review, the Company’s policy that no speculative trading in financial instruments shall be
undertaken.
Notes to Company financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
209
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).
2022
2021
Increase in cost of borrowing
100bps
100bps
Reduction in profit before tax (£m)
1.8
0.7
47. Share incentive reserve
£m
At 1 April 2020
19.8
Share-based payment charges in the year
3.8
Share options exercised in the year
(7.1)
At 1 April 2021
16.5
Share-based payment charges in the year
4.8
Share options exercised in the year
(2.9)
At 31 March 2022
18.4
48. Notes to the cash flow statement
2022
£m
2021
£m
Operating loss
(21.7)
(23.2)
Adjustments for:
Amortisation of intangible assets
0.5
0.6
Depreciation of property, plant and equipment
0.2
0.2
Depreciation of Right-of-use assets
0.5
0.4
Exceptional charges
—
4.1
Amounts received from subsidiary undertakings for share incentive schemes and other items
3.5
3.1
Share-based payment expense
1.7
1.1
Operating cash flows before movements in working capital
(15.3)
(13.7)
Increase in receivables
(140.4)
(43.2)
Decrease in payables
(3.5)
(2.6)
Movements in working capital
(143.9)
(45.8)
Cash used in operations
(159.2)
(59.5)
Income taxes received/(paid)
12.3
(0.3)
Interest paid (inclusive of payments on lease liabilities and non-bank interest)
(22.9)
(18.1)
Net cash outflow from operating activities
(169.8)
(77.9)
Financial statements
HomeServe plc Annual Report & Accounts 2022
210
49. Share-based payments
During the year ended 31 March 2022, the Company had three (FY21: three) share-based payment arrangements, which are described in
note 32.
LTIP
SVCP
One Plan
2022
Number
Outstanding at 1 April 2021
1,193,806
233,332
8,389
Granted
660,115
—
9,539
Transfer in
9,000
—
462
Lapsed
(310,112)
—
—
Forfeited
(53,655)
—
(866)
Exercised
(216,683)
—
(3,800)
Outstanding at 31 March 2022
1,282,471
233,332
13,724
Exercisable at 31 March 2022
—
—
—
Exercise price of options outstanding at 31 March 2022
£0.00
£0.00
£0.00
Weighted average remaining contractual life
3
2
2
Weighted average fair value of options granted in 2022
£8.01
n/a
£8.75
LTIP
SVCP
One Plan
2021
Number
Outstanding at 1 April 2020
1,218,460
233,332
7,012
Granted
341,453
—
3,234
Transfer in
8,460
—
1,513
Forfeited
(5,137)
—
(48)
Exercised
(369,430)
—
(3,322)
Outstanding at 31 March 2021
1,193,806
233,332
8,389
Exercisable at 31 March 2021
104,784
—
—
Exercise price of options outstanding at 31 March 2021
£0.00
£0.00
£0.00
Weighted average remaining contractual life
2
3
2
Weighted average fair value of options granted in 2021
£11.13
n/a
£11.79
The weighted average share price at the date of exercise for share options exercised during the year was £10.20 (FY21: £12.98).
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 FY22 the Company recognised an IFRS 2 charge of £1.7m (FY21: £1.1m) related to equity-settled share-based payment transactions.
Notes to Company financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
211
50. Related party transactions
During the year the Company purchased services amounting to £0.1m (FY21: £nil) 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 (FY22: £0.1m, FY21: £nil) and Centreline AV Limited
(FY22: £33,000, FY21: £29,000). Amounts outstanding to all these companies on 31 March 2022 amounted to £nil (FY21: £nil). No
guarantees have been given or received.
In respect of transactions with subsidiaries of the Group, the Company provided goods of £nil (FY21: £nil), provided services of £9.2m
(FY21: £9.5m), lent monies to of £141.0m (FY21: £56.3m) and borrowed monies from of £nil (FY21: £nil). Amounts due to subsidiary
companies total £0.1m (FY21: £nil). Amounts owed by subsidiary companies total £213.7m (FY21: £76.4m) which principally relate to
intercompany loans receivable. The Company provided services of £nil (FY21: £nil) to associates during the year and £0.2m (FY21: £0.1m)
to joint ventures during the year. The Company purchased services of £nil (FY21: £nil) from joint ventures during the year. There are no
amounts outstanding in either year with associates and £nil outstanding (FY21: £nil) 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.
2022
£m
2021
£m
Short-term employee benefits
4.3
4.3
Post-employment benefits
0.3
0.2
Termination benefits
—
3.6
Share-based payments expense
1.5
0.2
6.1
8.3
Except as noted above there were no other transactions with Directors requiring disclosure.
Financial statements
HomeServe plc Annual Report & Accounts 2022
212
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
Activity
Place of
incorporation
ownership (or
registration)
and operation
Proportion
of voting
interest
and
power %
Registered address
Directly held entities of HomeServe plc:
HomeServe Enterprises Limited
Trading
England
100
Cable Drive, Walsall, WS2 7BN
Indirectly held entities of HomeServe plc:
Holding Companies
HomeServe Assistance Limited
Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe International Limited
Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe Home Experts UK Limited
Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe North America UK Limited
Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe GB Limited (No. 5536994) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe France Holding SAS
Trading
France
100
9, rue Anna Marly, CS 80510, 69007 Lyon Cedex 7
HomeServe Energy Services SAS
Trading
France
100
9, rue Anna Marly, CS 80510, 69007 Lyon Cedex 7
HomeServe Energy Services Belgium SRL
Trading
Belgium
100
Manhattan Center, Avenue du Boulevard 21 / Bte 5 1210 Bruxelles
Mouse Holding SAS
Trading
France
20
73 Boulevard Hausmann, 75008 Paris
HomeServe USA Holdings Corp
Trading
USA
100
601 Merritt 7, Norwalk, CT 06851
HomeServe Beteiligungs GmbH
Trading
Germany
100
Rheinstr. 30-32, 65185, Wiesbaden
HomeServe Deutschland Verwaltungs GmbH
Trading
Germany
100
Klingholzstraße 7, 65189 Wiesbaden
HomeServe Deutschland Holding GmbH & Co. KG
Trading
Germany
100
Klingholzstraße 7, 65189 Wiesbaden
HomeServe Handwerksdienstleistung Deutschland GmbH
Trading
Germany
100
Klingholzstraße 7, 65189 Wiesbaden
HomeServe Assistance Deutschland GmbH
Trading
Germany
100
Klingholzstraße 7, 65189 Wiesbaden
VBF Holdings Limited (No. 12123573) 4 5
Trading
England
100
Cable Drive, Walsall, WS2 7BN
Sherrington Mews Limited (No. 09167024) 4
Trading
England
100
Building 2000, Lakeside North Harbour,
Western Road, Portsmouth, PO6 3EN
UK & Ireland
HomeServe Membership Limited
Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe Servowarm Limited (No. 560810) 4
Non-Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe At Home Limited (No. 4186398) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
Vetted Limited
Trading
England
100
Building 2000, Lakeside North Harbour,
Western Road, Portsmouth, PO6 3EN
247999 Limited (No. 7183505) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
Home Energy Services Limited (No. 8419975) 4
Non-Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe Manufacturer Warranties Limited (No. 4079068) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe Heating Services Limited (No. 3468609) 4
Non-Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe Trustees Limited (No. 3349817) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe France Limited (No. 9469168) 4
Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe USA Limited (No. 9468635) 4
Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe Now Limited (No. 12523412) 4
Non-Trading
England
100
Cable Drive, Walsall, WS2 7BN
CET Structures Limited 5
Trading
England
100
3 Boundary Court Warke Flatt, Willow Business Park,
Castle Donnington, DE74 2UD
Shermin Finance Limited 5
Trading
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe Europe Limited
Non-Trading
Ireland
100
25-28 Adelaide Road, Dublin 2
HomeServe America Limited
Non-Trading
Ireland
100
25-28 Adelaide Road, Dublin 2
HomeServe Gas Limited (No. 2248585) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
Home Service (GB) Limited (No. 3546370) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
Notes to Company financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
213
Name of legal entity
Activity
Place of
incorporation
ownership (or
registration)
and operation
Proportion
of voting
interest
and
power %
Registered address
Fastfix Plumbing and Heating Limited (No. 3120932) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe Care Solutions Limited (No. 3228902) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
HomeServe Warranties Limited (No. 3156861) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
Multimaster Limited (No. 3670180) 1
Dormant
England
100
Cable Drive, Walsall, WS2 7BN
Ondo InsurTech Plc
Trading
England
19.99
6th Floor, 60 Gracechurch Street, London, EC3B 0HR
Help-Link UK Limited
Trading
England
100
1175 Century Way, Thorpe Park, Colton, Leeds, LS15 8ZB
Energy Insurance Services Limited
Trading
England
100
Cable Drive, Walsall, WS2 7BN
Aqua Plumbing & Heating Services Limited (No. 04121404) 4
Trading
England
100
Cable Drive, Walsall, WS2 7BN
APG Domestic Services Limited (No. 04277772) 4 5
Trading
England
100
Unit 1, Jbf Units Dewhurst Row, Bamber Bridge,
Preston, England, PR5 6SW
John Wilkinson Heating Services Limited (No. 07645851 ) 4 5
Trading
England
100
Cable Drive, Walsall, WS2 7BN
Continental Europe
HomeServe SAS
Trading
France
100
9, rue Anna Marly, CS 80510, 69007 Lyon Cedex 7
HomeServe France Corporate SAS
Trading
France
100
9, rue Anna Marly, CS 80510, 69007 Lyon Cedex 7
Electro Gaz Service SAS
Trading
France
100
17, rue Bavastro, 06300, Nice
ID Energies SAS
Trading
France
100
ZA d’Armanville, route de la brique, 50700 Valognes
Sylvain Brun Froid SAS
Trading
France
100
401 rue des Champagnes 73290 La Motte-Servolex
HomeServe On Demand SAS
Trading
France
100
9, rue Anna Marly, CS 80510 , 69007 Lyon Cedex 7
Groupe Maison.fr SAS
Trading
France
20
350 avenue JRGG de la Lauzière, 13290 Aix-en-Provence
Societe V.B. Gaz
Trading
France
100
1 rue George Sand, 94000 Creteil
Aujard SAS
Trading
France
100
12 Av. du Président Paul Séramy, 77870 Vulaines sur Seine
Conviflamme SAS
Trading
France
100
Chemin des Carrières 14123 Fleury-sur-Orne
Lesage SAS
Trading
France
100
ZA d'Armanville secteur de prémesnil 50700 Valognes
Réseau Energies SAS
Trading
France
100
Chemin des Carrières 14123 Fleury-sur-Orne
Société de Maintenance Thermique SAS (SMT)
Trading
France
100
117 avenue du 8 mai 1945 42340 Veauche
G2M SAS
Trading
France
100
41 route de la libération 69110 Ste Foy les Lyon
PH Energies SAS
Trading
France
100
318 rue des digues, 14123 Fleury-sur-Orne
PH9 SAS
Trading
France
100
318 rue des digues, 14123 Fleury-sur-Orne
Pack SD SAS
Trading
France
100
318 rue des digues, 14123 Fleury-sur-Orne
Roussin Energies SAS
Trading
France
100
34, allée des Balmes, 38600 Fontaines
Dépann'Gaz SAS 5
Trading
France
100
15 Z.A. Cromel 50220 Saint-Quentin-Sur-Le-Homme
JCM Confort SAS 5
Trading
France
100
2 Rue Joseph Fourier 49070 Beaucouze
JC Technique SAS 5
Trading
France
100
2 Rue Joseph Fourier 49070 Beaucouze
HomeServe Belgium SRL
Trading
Belgium
100
Manhattan Center, Avenue du Boulevard 21 / Bte 5 1210 Bruxelles
Hainaut Chauffage C.S.T.E. SA 5
Trading
Belgium
100
sis 25, Rue de la Terre A Briques, 7522 Tournai
HomeServe Assistencia Spain SAU 2
Trading
Spain
100
Camino del Cerro de los Gamos 1, Parque empresarial
– Edificios 5 y 6, 28224 Pozuelo de Alarcon
HomeServe Iberia S.L.U. (formerly HomeServe Spain S.L.U.) 2
Trading
Spain
100
Camino del Cerro de los Gamos 1, Parque empresarial
– Edificios 5 y 6, 28224 Pozuelo de Alarcon
Seguragua SAU 2
Trading
Spain
100
Camino del Cerro de los Gamos 1, Parque empresarial
– Edificios 5 y 6, 28224 Pozuelo de Alarcon
Habitissimo S.L. 2
Trading
Spain
100
c/ Rita Levi, Edificio Blue - Parc Bit CP 07121, Palma de Mallorca
Bit Advanced Marketing S.L. 2
Trading
Spain
100
Passeig Mallorca 17C, 07011 Palma de Mallorca
Oscagas Hogar SLU 2
Trading
Spain
100
Rafael Alberti Nº 8, Zaragoza CP 50018
Somgas Hogar S.L. 2
Trading
Spain
100
Paseo Can Feu Num14, 08205 Sabadell, Barcelona
Linacal S.L.U. 2
Trading
Spain
100
Polig. Las Labradas, C. Estella S/N. 31500 Tudela, Navarra
Financial statements
HomeServe plc Annual Report & Accounts 2022
214
Name of legal entity
Activity
Place of
incorporation
ownership (or
registration)
and operation
Proportion
of voting
interest
and
power %
Registered address
Servicios Tecnicos Sate S.L. 2
Trading
Spain
100
Calle Anselmo Pie Sopena 1-Local 4,
Esquina Avenida Monegros No 31, Huesca
Solusat Asistencia Tecnica S.L. 2
Trading
Spain
100
Avda Ingeniero Torres Quevedo 6, 28022 Madrid
Servicio Tecnico Urueña S.L. 2
Trading
Spain
100
Calle Orixe 54 48015 Bilbao,Vizcaya
Aragonesa De Postventa S.L.U. 2
Trading
Spain
100
Calle Centro, Nº 40 Parque Tecnologico Nave 40 50298
Pinseque, Zaragoza
Infocale Navarra S.L.U. 2
Trading
Spain
100
Plaza De Los Sauces, 2, Trasera 31010 Baranain, Navarra
Técnica del frío Landaluce S.L.U. 2
Trading
Spain
100
Calle Quinta (La) Num 29-A 39750 Colindres, Cantabria
Mantenimientos Holguín S.L.U. 2
Trading
Spain
100
Plaza De Los Tilos S/N 31010 Baranain, Navarra
Mesos Gestión y Servicios S.L. 2
Trading
Spain
100
Avda Industria18 28820 Coslada, Madrid
Sanimamp 2005 S.L.U. 2 5
Trading
Spain
100
Calle Camp, 81, Cerdanyola del Valles, 08290, Barcelona
Atecal 2001 S.L.U. 2 5
Trading
Spain
100
Av. Roma, 10, B, Cerdanyola del Valles, 08290, Barcelona
HS Contact Desk S.L. 2
Trading
Spain
100
Camino cerro de los Gamos 1, 28224 Madrid
Esven Servicio Tenico S.L. 2 5
Trading
Spain
100
C/ Lluis Sagnier, 16 -18 Bajo 08302 Barcelona
Vimar Sociedad Civil 2 5
Trading
Spain
100
C/ Padre Marín, 13. 26004 Logroño, La Rioja
Mesos Portugal, Unipessoal LDA 2
Trading
Portugal
100
Praça Duque De Saldanha 1, EDIF. Atrium, 4º H-O.1069-244, Lisbon
Servitis LDA 2 5
Trading
Portugal
100
Rua Insdustrial das Lages, 63, 4410-312 Canelas, Vila Nova de Gaia
Preventivi SRL
Trading
Italy
100
Via Martiri di Bologna, 13, 76123 Andria
Schneider & Steffens GmbH & Co. KG 5
Trading
Germany
100
Mehlbachstrift 4, 21339 Lüneburg
North America
HomeServe USA Corp
Trading
USA
100
601 Merritt 7, Norwalk, CT 06851
HomeServe USA Repair Management Corp. 6
Trading
USA
100
1232 Premier Drive, Chattanooga, TN 37421
HomeServe USA Repair Management (Florida) Corp.
Trading
USA
100
1232 Premier Drive, Chattanooga, TN 37421
Leakguard Inc
Dormant
USA
100
601 Merritt 7, Norwalk, CT 06851
Leakguard Services Repair Inc
Dormant
USA
100
601 Merritt 7, Norwalk, CT 06851
HomeServe USA Repair Management (Iowa) Corp.
Dormant
USA
100
601 Merritt 7, Norwalk, CT 06851
HomeServe USA Repair Management (Virginia) Corp.
Dormant
USA
100
601 Merritt 7, Norwalk, CT 06851
HomeServe USA Repair Management (Wisconsin) Corp.
Trading
USA
100
601 Merritt 7, Norwalk, CT 06851
HomeServe USA Energy Services LLC
Trading
USA
100
500 Bi-County Blvd, Farmingdale, NY 11735
HomeServe USA Energy Services (New England ) LLC
Trading
USA
100
5 Constitution Way, Woburn, MA 01801
LI PH Enterprises LLC
Trading
USA
49
1307 Manatuck Blvd, Bay Shore, NY 11706
NYC PH Enterprises LLC
Trading
USA
49
4295 Arthur Kill Rd, Staten Island, NY 10309
SJESP Plumbing Services LLC
Trading
USA
90
420 N. 2nd Road, Unit 1, Hammonton NJ 08037
USP Holdings 1 LLC
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
USP Holdings 2 LLC
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
Utility Service Partners Inc.
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
Utility Service Partners Private Label, Inc.
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
USP Water Heater Rentals LLC
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
Utility Service Partners Private Label of Virginia, Inc
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
Columbia Service Partners Inc
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
Service Line Warranties of America, Inc - Delaware.
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
Service Line Warranties of America, Inc - California.
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
Service Line Warranties of Canada Holdings, Inc.
Trading
Canada
100
2600 – 1066 West Hastings Street, Vancouver, BC V6E 3X1
Columbia Service Partners of Pennsylvania, Inc
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
Columbia Service Partners of Kentucky, Inc.
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
50. Related party transactions (continued)
Interests held in related companies (continued)
Notes to Company financial statements
Year ended 31 March 2022
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
215
Name of legal entity
Activity
Place of
incorporation
ownership (or
registration)
and operation
Proportion
of voting
interest
and
power %
Registered address
Columbia Service Partners of Ohio, Inc.
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
Columbia Service Partners of West Virginia, Inc.
Trading
USA
100
4000 Town Center Blvd, Suite 400, Canonsburg, PA 15317
Service Line Warranties of Canada Inc.
Trading
Canada
100
2600 – 1066 West Hastings Street, Vancouver, BC V6E 3X1
HomeServe Skilled Trades LLC (formerly HomeServe
HVAC LLC)
Trading
USA
100
601 Merritt 7, Norwalk, CT 06851
Gregg Mechanical Corp.
Trading
USA
100
198 Pulaski Avenue, Staten Island, New York 10303
Geisel Heating and Air Conditioning Inc.
Trading
USA
100
633 Broad Street, Elyria, Ohio 44035
C.M.H., Inc (formerly Cropp-Metcalfe Air Conditioning
and Heating Company)
Trading
USA
100
8421 Hilltop Road, Fairfax, VA 22031
American Home Guardian Inc
Trading
USA
100
1839 S Alma School Rd, Mesa, AZ 85210
Nations Preferred Home Warranty Inc
Trading
USA
100
3530 Forest Lane, Dallas, TX 75234
Crawford Services, Inc
Trading
USA
100
1405 Avenue T. Grand Prairie, TX 75050
eLocal Holdings LLC
Trading
USA
89.5
1100 East Hector Street, Suite 101, Conshohocken, PA 19428
eLocal USA LLC
Trading
USA
89.5
1100 East Hector Street, Suite 101, Conshohocken, PA 19428
HomeServe SEM LLC
Trading
USA
100
2300 East Lincoln Highway, Suite 317 Langhorne, PA 19047
Hays Cooling and Heating LLC
Trading
USA
100
24825 N 16th Ave #115, Phoenix, AZ 85085
Worry Free Comfort Systems Inc
Trading
USA
100
630 20th St. N, Bessemer, AL 35020
Arizona’s Dukes of Air LLC
Trading
USA
100
6938 E. Parkway Norte Mesa, AZ 85212
Canyon State Air Conditioning & Heating LLC
Trading
USA
100
13632 West Camino Del Sol, Sun City West, AZ 85375
Renew Air, LLC
Trading
USA
100
6938 E. Parkway Norte Mesa, AZ 85212
Environmental Systems Associates, Inc
Trading
USA
100
9375 Gerwig Ln J, Columbia, MD 21046
Olympic Aire Services, Inc. 5
Trading
USA
100
4384 Hackett Place White Plains MD 20695
Sure Temp Air Conditioning, LLC 5
Trading
USA
100
7931 E. Pecos Road, Mesa, AZ 85212
Mark Gillece Plumbing & Heating, LLC 5
Trading
USA
100
4905 Library Road, Bethel Park PA 15102
McLoughlin Plumbing and Heating Co. 5
Trading
USA
100
8649 West Chester Pike, Upper Darby, PA 19082
Montgomery Brothers, LLC 5
Trading
USA
100
8951 West US HWY 42, Goshen, KY 40026
HomeServe Insurance Agency Corp. (formerly HomeServe
USA Repair Management Corp (California))
Trading
USA
100
601 Merritt 7, Norwalk, CT 06851
HomeServe Insurance Services Holding Corp
Trading
USA
100
601 Merritt 7, Norwalk, CT 06851
Asia
HomeServe Japan Corporation 3
Trading
Japan
50
MH-KIYA BLDG. 12-1, Mikuracho Kanda,
Chiyoda-ku, Tokyo 101-0038
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 reporting requirements in Spain and Portugal.
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 FY22. Please refer to note 16 for full details.
6 This company also operates in Canada.
Financial statements
HomeServe plc Annual Report & Accounts 2022
216
Unaudited
2022
£m
2021
£m
2020
£m
2019
£m
2018
£m
External revenue
Membership & HVAC – North America
583.0
506.4
429.5
333.4
282.1
UK
330.1
330.2
365.1
384.4
357.7
France
152.7
132.6
111.8
104.6
100.0
Spain
207.5
195.7
154.1
140.8
141.3
New Markets
0.8
—
—
—
—
Membership & HVAC – EMEA
691.1
658.5
631.0
629.8
599.0
Home Experts
155.2
139.8
71.8
40.4
18.6
External sales
1,429.3
1,304.7
1,132.3
1,003.6
899.7
Profit/(loss)
Membership & HVAC – North America
117.7
105.0
85.4
67.6
48.6
UK
72.9
72.5
81.0
66.0
61.1
France
36.4
35.6
33.8
33.3
31.5
Spain
20.8
17.7
20.1
17.7
16.6
New Markets
(5.6)
(6.3)
(4.7)
(2.4)
(1.6)
Membership & HVAC – EMEA
124.5
119.5
130.2
114.6
107.6
Home Experts
4.3
(10.2)
(13.9)
(7.4)
(2.8)
Adjusted operating profit
246.5
214.3
201.7
174.8
153.4
Amortisation of acquisition intangibles
(44.9)
(45.0)
(35.5)
(26.8)
(18.4)
Certain transaction related costs
1.0
(5.1)
—
—
—
Exceptional items
—
(92.4)
(7.6)
4.6
—
Operating profit
202.6
71.8
158.6
152.6
135.0
Net interest
(27.5)
(24.6)
(20.7)
(13.1)
(11.7)
Profit before tax
175.1
47.2
137.9
139.5
123.3
Five year summary
Continuing operations
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
217
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, this 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. Furthermore, it ensures that the impact of the historical costs of the vendor or considerations of the future profits to be
derived from the acquired business or assets are excluded.
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.
Glossary
Other information
HomeServe plc Annual Report & Accounts 2022
218
Reconciliations of statutory to adjusted profit measures
Total Group
£million
2022
2021
Operating profit (statutory)
202.6
71.8
Exceptional items
—
92.4
Certain transaction related (income)/costs
(1.0)
5.1
Amortisation of acquisition intangibles
44.9
45.0
Adjusted operating profit
246.5
214.3
Operating profit (statutory)
202.6
71.8
Exceptional items
—
92.4
Certain transaction related (income)/costs
(1.0)
5.1
Depreciation of property, plant and equipment
10.3
9.9
Depreciation of Right-of-use assets
15.1
15.2
Amortisation of acquisition intangible assets
44.9
45.0
Amortisation of other intangible assets
38.2
44.4
Amortisation of contract costs
5.6
9.0
Adjusted EBITDA
315.7
292.8
Profit before tax (statutory)
175.1
47.2
Exceptional items and certain transaction related costs
0.3
99.1
Amortisation of acquisition intangible assets
44.9
45.0
Adjusted profit before tax
220.3
191.3
Pence per share
Earnings per share (statutory)
39.5
9.3
Exceptional items and certain transaction related costs (net of tax)
0.1
23.0
Amortisation of acquisition intangible assets (net of tax)
9.7
10.4
Adjusted earnings per share
49.3
42.7
Glossary continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
219
Segmental
2022
Membership & HVAC – EMEA
£m
Membership & HVAC – North America
UK
France
Spain
New Markets
Home Experts
Revenue
583.0
337.5
152.7
207.5
0.8
155.2
Statutory operating profit/(loss)
101.7
68.9
29.4
17.6
(5.6)
(9.4)
Operating margin %
17%
20%
19%
8%
—
—
Adjusting items
Certain transaction related (income)/costs
(3.2)
—
0.1
—
—
2.1
Amortisation of acquisition intangibles
19.2
4.0
6.9
3.2
—
11.6
Total adjusting items
16.0
4.0
7.0
3.2
—
13.7
Effect on operating margin (ppts)
3ppts
2ppts
5ppts
2ppts
—
—
Adjusted operating profit/(loss)
117.7
72.9
36.4
20.8
(5.6)
4.3
Adjusted operating margin %
20%
22%
24%
10%
—
—
2021
Membership & HVAC – EMEA
£m
Membership & HVAC – North America
UK
France
Spain
New Markets
Home Experts
Revenue
506.4
338.9
132.6
195.7
—
139.8
Statutory operating profit/(loss)
82.2
(18.5)
28.4
14.7
(10.0)
(25.0)
Operating margin %
16%
—
21%
8%
—
—
Adjusting items
Certain transaction related costs
2.0
—
—
—
—
3.1
Exceptional items
—
87.8
—
0.6
3.7
0.3
Amortisation of acquisition intangibles
20.8
3.2
7.2
2.4
—
11.4
Total adjusting items
22.8
91.0
7.2
3.0
3.7
14.8
Effect on operating margin (ppts)
5ppts
n/a
6ppts
1ppt
n/a
n/a
Adjusted operating profit/(loss)
105.0
72.5
35.6
17.7
(6.3)
(10.2)
Adjusted operating margin %
21%
21%
27%
9%
—
—
Other information
HomeServe plc Annual Report & Accounts 2022
220
2022
Membership & HVAC – EMEA
Local currency million
Membership & HVAC – North America $
UK
France €
Spain €
New Markets
Home Experts
Revenue
794.9
337.5
179.9
244.2
0.8
155.2
Statutory operating profit/(loss)
137.5
68.9
34.7
20.8
(5.6)
(9.4)
Operating margin %
17%
20%
19%
8%
—
—
Adjusting items
Certain transaction related (income)/costs
(4.4)
—
0.1
—
—
2.1
Amortisation of acquisition intangibles
26.0
4.0
8.2
3.8
—
11.6
Total adjusting items
21.6
4.0
8.3
3.8
—
13.7
Effect on operating margin (ppts)
3ppts
2ppts
5ppts
2ppts
—
—
Adjusted operating profit/(loss)
159.1
72.9
43.0
24.6
(5.6)
4.3
Adjusted operating margin %
20%
22%
24%
10%
—
—
2021
Membership & HVAC – EMEA
Local currency million
Membership & HVAC – North America $
UK
France €
Spain €
New Markets
Home Experts
Revenue
665.8
338.9
148.5
219.0
—
139.8
Statutory operating profit/(loss)
107.9
(18.5)
31.8
16.4
(10.0)
(25.0)
Operating margin %
16%
—
21%
8%
—
—
Adjusting items
Certain transaction related costs
2.6
—
—
—
—
3.1
Exceptional items
—
87.8
—
0.7
3.7
0.3
Amortisation of acquisition intangibles
27.4
3.2
8.1
2.7
—
11.4
Total adjusting items
30.0
91.0
8.1
3.4
3.7
14.8
Effect on operating margin (ppts)
5ppts
n/a
6ppts
1ppt
n/a
n/a
Adjusted operating profit/(loss)
137.9
72.5
39.8
19.8
(6.3)
(10.2)
Adjusted operating margin %
21%
21%
27%
9%
—
—
Glossary continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
221
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. However, 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. Furthermore, 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 2022 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:
2022
£m
2021
£m
Current liabilities from borrowing and lease liabilities
Lease liabilities
15.2
12.7
Banks and other loans
100.9
54.0
116.1
66.7
Non-current liabilities from borrowings and lease liabilities
Lease liabilities
36.3
38.6
Bank and other loans
664.9
579.8
701.2
618.4
Total liabilities from borrowings and lease liabilities
817.3
685.1
Cash and cash equivalents
(174.5)
(171.4)
Net debt
642.8
513.7
Adjusted EBITDA
315.7
292.8
Leverage
2.0x
1.8x
Other information
HomeServe plc Annual Report & Accounts 2022
222
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. It also indicates 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.
2022
£m
2021
£m
Adjusted operating profit
246.5
214.3
Exceptional items
—
(92.4)
Certain transaction related income/(costs)
1.0
(5.1)
Amortisation of acquisition intangibles
(44.9)
(45.0)
Operating profit
202.6
71.8
Exceptional items
—
92.2
Impact of certain transaction related (income)/costs
(1.0)
5.1
Depreciation and amortisation
114.1
123.5
Non-cash items
(2.0)
10.2
Increase in working capital
(41.2)
(25.1)
Cash generated by operations
272.5
277.7
Net interest and borrowing costs
(24.5)
(21.7)
Repayment of lease principal
(14.7)
(14.8)
Taxation
(40.6)
(35.1)
Capital expenditure - ordinary
(68.2)
(71.4)
Capital expenditure - acquisitions of policy books
(2.3)
—
Proceeds on disposal of fixed assets
8.8
0.3
Free cash flow
131.0
135.0
2022
£m
2021
£m
Adjusted operating profit
246.5
214.3
Cash generated by operations
272.5
277.7
Cash conversion
111%
129%
KPIs
HomeServe is now comprised of three divisions, each of which are at different stages of development and have different growth drivers.
In addition to Group key performance indicators ("KPIs") the Group uses operational KPIs specific to each division to more accurately
capture the particular growth drivers of each division.
These indicators provide insight into past performance, and are an indicator of the future prospects of each division and the Group as a
whole.
Group
Adjusted profit before tax is the Group’s key profit measure by which business growth is monitored.
Return on invested capital (ROIC) tracks the Group’s ability to generate returns from each unit of capital (both debt and equity) being
utilised in the business. The Group calculates ROIC by expressing net operating profit after tax as a percentage of invested capital
(being the average value through the year of total assets net of current payables, cash and cash equivalents).
Growth in adjusted earnings per share tracks the Group’s ability to grow earnings for shareholders, offering indicative potential for
shareholder returns through both distributions and capital appreciation.
Relative total shareholder returns tracks the return to shareholders from dividends and share price gains, relative to a benchmark of
comparable FTSE constituents.
Glossary continued
Strategic report
Governance
Financial statements
Other information
HomeServe plc Annual Report & Accounts 2022
223
North American Membership & HVAC
New Membership customer additions tracks success in organically converting the addressable market into new revenue generating
customers.
Membership customers tracks success in growing the total base of Membership policyholders over time
Net income per Membership customer reflects the ability to deliver value added products and services to existing customers.
Policy retention rate reflects the ability to consistently deliver value to customers, such that they renew their Membership.
HVAC adjusted operating profit measures ability to drive organic growth from the existing HVAC portfolio and continue to source and
acquire high quality targets.
EMEA Membership & HVAC
Organic new customer additions tracks success in organically converting the addressable market into new revenue generating
customers.
Policy retention rate reflects the ability to consistently deliver value to customers, such that they renew their Membership.
Non-Membership sales tracks the diversification of the EMEA businesses into the complementary product offerings of HVAC and
Claims Assistance.
Home Experts
Paying trades are the customers in the Home Experts businesses. This tracks progress in building an engaged and high quality online
community of tradespeople.
Average revenue per trade tracks the ability to design, deliver and monetise value-added services to the online community of
tradespeople.
Contacts tracks the ability to deliver value to customers (tradespeople), in the form of access to consumers’ home improvement job
requirements.
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
End user of the service
Home Experts
HVAC
Other
Other information
HomeServe plc Annual Report & Accounts 2022
224
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.
Shareholder information
HomeServe plc Annual Report & Accounts 2022
225
This Report was printed by Pureprint
Group, a Carbon Neutral® company.It was
printed using its pureprint® environmental
printing technology. 100% vegetable-
based inks were used and a water-based
coating. 99% of the dry waste and 95%
of cleaning solvents associated with the
production were recycled.
The carbon produced in the
manufacturing of the paper have been
offset. The paper and the printing are
therefore carbon neutral. Both the paper
mill and printer are registered to the
Environmental Management System ISO
14001 and are Forest Stewardship Council,
FSC® chain-of-custody certified.
The outer cover has not been laminated to
make this document 100% recyclable.
CBP00019082504183028
HomeServe plc
Registered Office:
Cable Drive, Walsall, WS2 7BN
Registered in England No. 2648297
Tel: 01922 426262
homeserveplc.com