North America continued to propel growth at home repairs business HomeServe (HSV) in the first half of FY2020, with adjusted operating profit from the region surging by 32 per cent to £18.5m. This came amid a 13 per cent increase in customer numbers to 4.2m, meaning the segment now accounts for over half the entire customer base. A post-period agreement to purchase a 79 per cent stake in eLocal Holdings has permitted entry into the home experts market there. The acquisition is expected to add $5m (£3.9m) to group adjusted operating profit in 2020, rising to a $16m contribution in 2021.
Despite a 5 per cent drop in revenue in the UK, organisational changes and service efficiency pushed adjusted operating profit up by almost two-fifths to £14m. Driven by cross-selling and a shift towards more comprehensive cover, income per customer increased by 18 per cent to £129.
Spending £11.1m on acquisitions in heating, ventilation and air conditioning (HVAC), the group is looking to grow installation revenue from both new and existing customers and to generate opportunities to sell more policies and services. This acquisitive activity pushed net debt (excluding lease liabilities) up by 35 per cent to £394m. But free cash flow came in at a healthy £37.5m, despite high levels of capital expenditure on technology.
Peel Hunt has revised its forecasts upwards, and now expects adjusted pre-tax profit of £177.5m and EPS of 40.6p for the March year-end, rising to £207.5m and 46.8p in FY2021.
| HOMESERVE (HSV) | ||||
| ORD PRICE: | 1,264p | MARKET VALUE: | £4.23bn | |
| TOUCH: | 1,263-1,265p | 12-MONTH HIGH: | 1,298p | LOW: 848p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 38 | |
| NET ASSET VALUE: | 178p* | NET DEBT: | 66%** | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 404 | 19.3 | 4.6 | 5.2 |
| 2019 | 458 | 19.7 | 5.0 | 5.8 |
| % change | +13 | +2 | +9 | +12 |
| Ex-div: | 05 Dec | |||
| Payment: | 07 Jan | |||
| *Includes intangible assets of £863m. or 258p a share. Excludes £57.4m in lease liabilities | ||||
