Domestic repairs insurer Homeserve (HSV) has something of a problem. Its UK business, which is being investigated by the FSA, is shrinking and its expanding overseas business is not growing fast enough to make up the gap. Things aren't coming to a head just yet because Homeserve got a boost from cost-cutting and its acquisition of Domeo in France. That meant adjusted pre-tax profits rose 9 per cent to £25.6m and the interim dividend was held. But major challenges remain.
UK customer numbers were down 500,000 on a year ago to 2.5 million and management expects to lose another 100,000 to 300,000 in the second half. And, with the FSA investigation restricting marketing activities, new policy sales have been decimated from 600,000 in the prior period to 67,000. UK revenues were down 11 per cent to £134.5m, but after 400 jobs were cut from sales and marketing helped save around £17m in costs, operating profits rose from £25.8m to £26m.
Buying the full ownership of Domeo in France more than doubled revenues there from £12.5m to £26.6m, and operating profits rose from £1.3m to £5.6m. Elsewhere, customer numbers in the US were up 20 per cent and Spain rose 42 per cent, albeit from a low starting point, but both businesses were loss-making in the period.
Broker Panmure Gordon forecasts adjusted pre-tax profits of £110m, giving EPS of 24p, falling to £95m and 20.9p the year after (from 27.3p in 2012).
HOMESERVE (HSV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 227p | MARKET VALUE: | £749m | |
| TOUCH: | 226.5-227p | 12-MONTH HIGH: | 315p | LOW: 136p |
| DIVIDEND YIELD: | 5.0% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 107p* | NET DEBT: | 22% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 213 | 18.2 | 4.2 | 3.63 |
| 2012 | 230 | 19.1 | 4.2 | 3.63 |
| % change | +8 | +5 | - | - |
Ex-div: 5 Dec Payment: 3 Jan *Includes intangible assets of £399m, or 121p a share | ||||
