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Homeserve turns a profit in North America

Customer numbers were up in the US, and the group bought out the remaining shares in Checkatrade
November 22, 2017

North America proved to be the main market for domestic repairs business Homeserve (HSV) at the half-year mark, leading to its first ever half-year profit in the region of £11.4m and making it the biggest contributor to the bottom line on an adjusted basis. The improved showing came on the back of a 12 per cent rise in customers and an 8 per cent increase in the number of commercial partners across the pond. Richard Harpin, chief executive, said growth in the US would continue at similar rates, with the acquisition of home assistance business Dominion Products and Services significantly expanding the group's catchment. 

IC TIP: Hold at 830p

For the group as a whole, higher amortisation charges arising from acquisitions made in the last year weighed on statutory earnings, but on an adjusted basis pre-tax profit was broadly flat at £29m. The growth in customers numbers across all the group's locales was complemented by a customer retention rate of 82 per cent. The group acquired the remaining 60 per cent of Checkatrade for £54m, as part of its plan to create an on-demand “Home Experts platform”, an online model Mr Harpin said created an opportunity for the group to become the “AirBNB, Just Eat or Expedia” of its sector.

Analyst forecasts remained largely unchanged, with UBS expecting adjusted operating profit of £152m, giving EPS of 32p for the year ended March 2018 (from £119m and 26.5p in 2017).

HOMESERVE (HSV)   
ORD PRICE:830pMARKET VALUE:£2.72bn
TOUCH:829.5-830.5p12-MONTH HIGH:872pLOW: 505p
DIVIDEND YIELD:1.9%PE RATIO:35
NET ASSET VALUE:108p*NET DEBT:85%
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201631422.25.44.1
201736621.25.14.7
% change+16-5-6+15
Ex-div:7 Dec   
Payment:5 Jan   
*Includes intangible assets of £617m, or 188p a share