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Directors' report

The Directors have pleasure in presenting their Annual Report and Accounts for the year ended 31 March 2010.

Principal activities

During the year the Group was engaged in the provision of insured repair solutions and emergency services to the home. Details of the Group's activities and a review of the business are set out in the Chairman's statement, Chief Executive's review and Financial review.

Details of the key performance indicators used by the Directors to assist in the management of the business and to provide evidence of the achievement of its strategies are included on Strategy page.

A description of the principal risks and uncertainties facing the Group is included in the Financial Review.

Information relating to the environment and employees is included in the Corporate responsibility report.

Financial results and dividends

The Group's results are shown in the Group income statement on Financial statements section. The Directors are recommending the payment on 4 August 2010 of a final dividend of 8.5p per ordinary share to shareholders on the register at the close of business on 2 July 2010 which, together with the net interim dividends of 11.5p per ordinary share paid on 3 January 2010 and 24.0p per ordinary share paid on 1 April 2010, results in a total net dividend for the year of 44.0p per share (2009: 35.5p). For further details of the dividend see note 12 to the financial statements.

Capital structure

Details of the authorised and issued share capital, together with details of the movements in the Company's issued share capital during the year are shown in note 26. The Company has 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 nor 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 38. 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 2009 authorised the Directors to allot shares in the capital of the Company up to a maximum nominal amount of £2,841,739 (being approximately 35% of the then issued share capital) with a further authority to allot shares up to a maximum nominal value of £406,462 (being approximately 5% of the then issued share capital) as if statutory pre-emption rights did not apply.

The authorities given to the Directors to allot shares at the 2009 AGM were granted for a period expiring at the 2010 AGM of the Company or 31 October 2010, if earlier. Similar resolutions will be put to the forthcoming AGM to renew this authority.

The 2009 AGM authorised the purchase by the Company of up to 6,535,405 ordinary shares (being approximately 10% of the then issued share capital) and this authority will remain available until the forthcoming AGM, when the granting of a similar authority will be proposed. No shares were purchased during the year and no shares are held in Treasury.

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

The Directors who held office during the year were:
Richard Harpin
Martin Bennett (appointed 26 June 2009)
Jon Florsheim
Ian Chippendale
JM Barry Gibson
Mark Morris
Andrew Sibbald
Brian Whitty (resigned 31 March 2010)
Jonathan Simpson-Dent (resigned 26 June 2009)

Having been appointed since the notice of the last AGM, Martin Bennett will retire from the Board in accordance with the Articles of Association and, being eligible, will offer himself for election. Ian Chippendale retires by rotation and, being eligible, offers himself for re-election. Martin Bennett serves under a contract of employment terminable on 12 months' notice by either party. Ian Chippendale serves under a three year renewable letter of appointment with no liquidated damages.

In respect of the appointment and replacement of Directors, the Company is governed by its Articles of Association, the Combined Code, the Companies Act 2006 and related legislation. The Articles may be amended by special resolution of the shareholders. The powers of Directors are described in the Board's terms of reference (which are available on request from the Company Secretary) and the Corporate governance report.

The beneficial interests of the Directors in the shares of the Company and the options held as at 31 March 2010 and 25 May 2010 are set out in the Remuneration report. None of the Directors serving at the year end had a beneficial interest in the share capital of any subsidiary company.

Each of the Directors confirms that as far as he is aware, there is no relevant audit information of which the Company's auditors are unaware and that he has taken all reasonable steps to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Annual General Meeting

The 2010 Annual General Meeting of the Company is to be held on 30 July 2010 at 10.00am. The notice of the meeting accompanies this report.

Auditors

A resolution proposing the reappointment of Deloitte LLP as auditors and authorising the Board to fix their remuneration will be put to the Annual General Meeting.

Fixed assets

Capital expenditure on tangible fixed assets amounted to £5.2m (2009: £4.1m) during the year.

Donations

Charitable donations of £23,000 (2009: £43,000) were made during the year. No political contributions were made in either year.

Payment of creditors

The Group's policy is to pay suppliers in line with the terms of payment agreed with each of them when contracting for their products or services. Trade creditors at 31 March 2010 represented 49 days of purchases during the year (2009: 68 days) for the Group and 45 for the Company (2009: 45 days).

Substantial shareholdings

As far as the Directors are aware, no person had a beneficial interest in 3% or more of the voting share capital at 10 May 2010, except for the following:


Name		 Ordinary
shares
%
AMVESCAP PLC 11,662,738 17.74
Richard Harpin1 11,021,714 16.76
Schroders plc 5,182,416 7.88
Standard Life Investments Ltd 4,676,196 7.11
Baillie Gifford & Co 4,176,287 6.35
Jeremy Middleton 2,500,000 3.80
Legal & General Group plc 2,262,623 3.44
  • 1Includes an indirect interest of 5,700 shares.

Taxation status

The Company is not a close company within the meaning of the Income and Corporation Taxes Act 1988.

Employment policies

It is the Group's policy that all persons should be considered for employment, training, career development and promotion on the basis of their abilities and aptitudes, regardless of physical ability, age, gender, sexual orientation, religion or ethnic origin.

HomeServe plc and its subsidiaries apply employment policies that are fair and equitable for all employees and these ensure that entry into, and progression within the Group, are determined solely by application of job criteria and personal ability and competency.

Full and fair consideration (having regard to the person's particular aptitudes and abilities) is given to applications for employment and the career development of disabled persons. HomeServe's training and development policies also make it clear that it will take all steps practicable to ensure that employees who become disabled during the time they are employed by the Group are able to remain employed by the Group.

Employee involvement

HomeServe attaches considerable importance to ensuring that all its employees are provided with information concerning them as employees, particularly the economic and financial factors affecting its performance and the market in which it operates. Involvement of employees in the Group's performance is also encouraged by the availability of performance-related bonuses as well as share option schemes, which are described in more detail elsewhere in this report.

We continue to make effective use of Company intranets, staff magazines and employee representative forums both to disseminate information and to receive feedback and ideas from employees regarding business strategy and performance. Consultation between management and staff is an ongoing process and employees are consulted on issues directly affecting them as soon as is practicable.

By Order of the Board

Anna Maughan

Company Secretary
25 May 2010

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