1

Preliminary Results 2004

2

Brian WhittyChairman

3

Continuing Operations

2004 2003 Increase

Turnover £250.6m £194.4m 29%

Operating Profit* - domestic £32.4m £24.0m 35%

- commercial £5.1m £4.5m 13%

Profit before tax* £36.8m £27.1m 36%

Earnings per share*

Earnings per share* post share consolidation

33.8p

42.2p

25.2p 34%

Total Group

2004 2003 Increase

Turnover £323.0m £265.8m 22%

Profit Before Tax* £51.7m £44.5m 16%

Earnings per share* 51.0p 45.9p 11%

Highlights of the Year

*Excluding goodwill and exceptional costs

4

5

Richard HarpinChief Executive

6

Home Service• Policies up 22% to 2.93m, plumbing 2.1m (1.73m), electrics 0.57m (0.55m) and other

0.26m (0.12m)

• 928,000 new policies in the year (858,000)

• Policy acquisition costs plus 8%

• Average number of policies per customer 1.5 (1.4)

• Retention rate increased from 86% to 88%

• Successful trial of welcome calls – 20% conversion

• Manufacturer Warranty partners now include Sime Boilers

7

The Plumbing Market 2004

• 94% of British Gas plumbing policies are cross sell

• 52% of homeowners with heating cover have plumbing and drainage cover

• 34% have no extended warranties/home assistance

• 70% awareness of plumbing cover among non members

• Water Company awareness 3.75 times British Gas

• 20% are considering plumbing cover in the future

Source: Hirst Home Assistance Consumer Research – May 2004

17m Homeowners

Total Plumbing2.9m

BG Heating3.25m

InsuranceMinded 5.1m

Won’t happen to me5.8m

Potential InstantCover

Covered byHome Insurance

8.2m

• “DIY”• “Know a Plumber”

8

Plumbing Penetration

Home Service Plumbing Penetration1 by Water Company Area

0%

5%

10%

15%

20%

25%

30%

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Wat

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Wat

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o 9

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0

Wat

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1

Wat

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2

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3

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Water Company Area

Per

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31/03/03 31/03/04

Total Market Penetration2 - 2004

Total Market Penetration2 - 2003

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International

France

• 163,000 policies (60,000) retention rate of 87%

• Success of heating breakdown cover 3% take up

• Outbound telesales team of 8 – 2.3 sales per hour

USA

• 15,000 policies with supply pipe take up over 4%

• Rolled out beyond initial test to all Aqua Pennsylvania and Aqua New Jersey homeowners

• Upsell to full Plumbing and Drainage cover

• Rate of growth dependent on new Water Company affinity partners

10

Highway

• Achieved profitability in the year• Final quarter trading demonstrated significant

operational improvements– Royal and Sun Alliance volumes increased

– Conversion of leads improved

– Average jobs values up 5%

– Achieved significant procurement savings

• Now working for 3 major insurers on plumbing and drains

• New operational systems to be implemented in first half of this year, further improving efficiency

• Q4 performance provides a sound platform for growth

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Repair strategy: Household claims - The Options

Franchised Repairer: National coverage but “Only as good as the worst

franchisee”. “Too many fingers in the pie”. Local/Area Builder Network: Low average claims cost but Variable quality. Very high call centre and supplier

management costs. Unlikely to develop business

model, e.g. EDI development. High cost of job validation and

payment

Loss Adjuster Model: Less volume compared to

historically. Used for higher value claims. Often use own repair network. High cost per job including loss

adjuster fee. Directly Employed Model: National coverage. Single supplier. Specialist. Best overall value. Fully controllable service delivery. Not available for all trades.

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Regency• Excellent performance despite the difficult

furniture retail market conditions and withdrawal of structural warranties

• 1.84m optional extended furniture warranty policies in place (2003 1.4m)

• Secured Land of Leather account, which has significant potential

• Other new customer wins included Freemans, Grattan and Shop Direct, which compliment Littlewoods Mail Order offering

• Regency at Home has 140 directly employed repairers working on behalf of retailers and manufacturers

• Regency at Home now working on behalf of Highway’s insurance customers providing repair and cleaning service

• Opportunity is further growth in upholsterers and ‘minor flood’ work for Household Insurers

13

Home Hotline

Home Hotline

• Best ever customer satisfaction 95% from callbacks

• 1.67m calls (+25%)

• Market leader in Home Assistance

• Growth in External Clients – RBS Group, Norwich Union

• New purpose built call centre by September 2004

• Opportunity is Home Assistance offer to Highway’s Household Insurers

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Converting repudiated claims into Customer Delight and Increased Customer Retention

Initial Claim

RejectedAccepted Consequential Damage

• Plumbing emergency• Electrical fault• Blocked drain• Storm damage to trees• Pest

• “Instant Cover Opportunity”• Domestic Emergency upgrade to your Household policy.• Potential reduced cost of a consequential damage claim with a two hour deployment

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Commercial Outsourcing• Overall turnover flat year on year whilst

average margins maintained

• Onsite experienced reduced turnover resulting from inconsistent work loads on major contracts and reduced water industry spend

• Recently secured 10 year replacement contract with Thames Water

• Prospects for growth as water and sewerage companies move into AMP4

• Middleton Doorman recently established barrier installation and maintenance business

• Mail Solutions has performed well in a highly competitive market, although recent contract renewals at lower margins

• Undertaking a strategic review of all Commercial Outsourcing options

16

Andrew BelkFinance Director

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Group Profit and Loss

Turnover 323.0 265.8 22%

Operating Profit 58.7 50.5 16%

Interest (7.0) (6.0) 17%

Profit Before Tax 51.7 44.5 16%

Tax (15.2) (12.8) 19%

Minority Interest (4.2) (2.9) 45%

Earnings 32.3 28.8 12%

EPS 51.0p 45.9p

DPS 20.0p 18.0p

Year ended 31 March 2004, £m 2004 2003 %

All figures before goodwill and exceptional items-Exceptional costs of demerger £6.6m-Goodwill of £7.2m (2003: £6.0m)All subsequent slides are Homeserve continuing operations

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Profit and Loss

Turnover 250.6 194.4 29%

Operating Profit 37.4 28.5 31%

Interest (0.7) (1.4) (50)%

Profit Before Tax 36.8 27.1 36%

Tax (11.3) (8.4) 34%

Minority Interest (4.2) (2.9) 45%

Earnings 21.3 15.8 34%

EPS 33.8p 25.2p 34%

EPS Post share consolidation 42.2p

Year ended 31 March 2004, £m 2004 2003 %

All figures before goodwill and exceptional items

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Turnover and Operating Profit2004 2003

£’m Turnover % Operating

Profit

% Turnover Operating

Profit

Home Service 105.8 37% 27.4 42% 77.3 19.3

Regency 15.8 21% 4.6 15% 13.1 4.0*

Highway 47.6 54% 0.3 (57%) 30.9 0.7+

Domestic 169.2 39% 32.3 35% 121.3 24.0

Commercial 87.0 12% 5.1 13% 77.4 4.5

Inter Division (5.6) - (4.3) -

Total 250.6 29% 37.4 31% 194.4 28.5

* 11 month period+ 9 month period

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Home Service

• Turnover increased by 37%

• Operating Profits up 42%

• Margins increased by 1% to 26%

• Key financial drivers:

– Renewals rate increased to 88% from 86%

– Cost of acquisition up 8% reflecting greater acquisition activity

– Price increase of £2 in September 2003

– 70% recurring revenues

• International investment £0.5m

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Regency

Regency• Loss of structural warranty sales mitigated by new optional product• New customers continue to contribute to growth• Underwriting costs stable• Repair business turnover up from £3.3m to £5.5m

Highway

• Reorganisation costs in excess of £0.5m

• High level of operational gearing in anticipation of RS&A

• Q4 performance significantly ahead of prior year, reflecting a range of initiatives:

– Conversion of leads to sales improved by 5%

– Labour efficiency improved by 1 percentage point

– Raw material price reductions negotiated, with major suppliers

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Cash Flow

Operating Profit (pre goodwill) 37.4 28.5Depreciation and profit on disposals 6.9 6.2Increase/(Decrease) in working capital and loss in JV 1.7 1.8Exceptional Costs (1.1) -

Net cash inflow from operating activities 44.9 36.5

Net interest / dividends to minority (2.4) (3.6)Taxation (9.6) (8.2)Capital expenditure (7.0) (5.7)Acquisitions and financing (4.5) (9.5)Equity dividends paid (11.7) (10.5)

Increase/(decrease) in Cash 9.7 (1.0)

Net Cash 0.6

Year ended 31 March 2004, £m 2004 2003

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Proforma Balance Sheet

Fixed Assets- Tangible 32.0- Goodwill 175.2Net Current Assets 0.5Deferred Consideration (10.0)Deferred Income (15.0)

Net debt (0.1)

Provisions for liabilities and charges (1.6)

Net Assets 181.0

• Proforma Balance Sheet is unaudited

• Deferred consideration reduced by £11.9m in year

• Goodwill on share exchange of £66.9m

As at 31 March 2004, £m 2004

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Dividends and Share Capital

Interim Dividend 6.1p 6.1p £3.8m

Final Dividends

Homeserve plc 7.0p 8.8p £4.5mSouth Staffordshire Plc 6.9p £4.4m

20.0p £8.9m

Number of Shares 63.8m 51.1mShares issued to minority - 11.6 Number of Shares - 62.7m

• Shares issued to minorities ex-dividend

Pre Consolidation Post Consolidation

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Homeserve plc Summary

Key Highlights

• Homeserve operating profits increased by 31% to £37.4m

• Home Service profits increased by 42%

• Cash generated from operating activities of £44.9m

• Net cash of £0.6m at year end

• No minority interest charge in future years

• Considering implementation date for IFRS including option schemes

• Expect to maintain a progressive dividend policy

All figures before goodwill and exceptional items