Homeserve warned last November that profits might be affected by falling demand for repair insurance, and so a rise in policy sales in the UK from 1.68m to 1.83m came as a pleasant surprise. Moreover, retention rates are running at around 83 per cent, albeit down slightly on the previous year. And while group turnover was lower, group operating profits were up 10 per cent to £100m, helped by a boost in income per customer by 18 per cent to £59.
However, the emergency services division became a casualty of a restructuring of the UK operation which involved the transfer of the claims network and policy repair networks into Homeserve's core policy business. This will enable a streamlined and more efficient offering to customers. However, poor trading in the emergency services led to an impairment charge of £97m on the carrying value of the business. Excluding exceptional charges pre-tax profits rose 13 per cent to £96.1m and adjusted EPS was up from 93p to 106.4p.
The overseas operations put in a solid performance with operating profits in mainland Europe trebling to £5.3m and the smaller US business turning profitable in the second half on the back of a 52 per cent rise in policies and modestly higher retention rates. Overall total policy numbers across the business increased from 8.1m to 9.1m and the client base rose from 4m to 4.3m.
Broker's estimates are under review following the results.
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| HOMESERVE (HSV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,188p | MARKET VALUE: | £776m | |
| TOUCH: | 1188-1197p | 12-MONTH HIGH: | 2,045p | LOW: 840p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | na | |
| NET ASSET VALUE: | 326p* | NET DEBT: | 16% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 221 | 39.8 | 43.5 | 16.0 |
| 2006 | 367 | 50.0 | 55.1 | 20.0 |
| 2007 | 477 | 61.1 | 67.3 | 25.0 |
| 2008 | 555 | 71.8 | 79.0 | 31.2 |
| 2009 | 518 | -21.7 | -56.2 | 35.5 |
| % change | -7 | - | - | +14 |
Ex-div: 1 Jul Payment: 4 Aug *Includes intangible assets of £219m, or 336p a share | ||||
