Home repairs and improvements company Homeserve (HSV) reported 13% growth in full year sales to 31 March 2020, fuelling a 15% rise in adjusted operating profits to £202m and a 10% rise in the dividend to 23.6p. The shares traded up 2% to £18.70.
NO MATERIAL IMPACT FROM CORONAVIRUS
The company worked quickly to transition its entire 6,000 office-based workforce to home working, including contact centre agents. Management reported no noticeable increase in cancellation rates while customer satisfaction scores returned some of the best ever scores during April.
In an effort to help front-line NHS and social care workers, the firm completed over 2,000 emergency repairs for free across the UK.
A company sponsored survey in April showed that over a third of customers considered the Homeserve service more important to them compared with March.
April to September is usually a quieter period for marketing, so the company has paused most large scale campaigns, which will slow future growth, but also save money.
In the Home Experts platform businesses, which link-up trades people with consumers, social distancing measures has resulted in falling demand, with the UK Checkatrade trading at 85% of pre-crisis levels.
Homeserve introduced a 50% discount offer to help members during lock-down and some 78% of trades have taken up the offer while 22% have moved to free affiliate membership.
The Checkatrade, Habitissimo and eLocal platforms represent less than 10% of group revenues and are still to make a material profit.
The board has conducted a viability assessment over a three-year period to 31 March 2023 and concluded that no single scenario tress test would impact the viability of the group.
Management’s working assumption is that the world will come out of lock down over the summer months.
Under this scenario Homeserve expects to continue its progress towards meeting its medium to long-term targets of growing the US business while break-even at Checkatrade has been pushed back by one year to the 2023 financial year.
The company expects to report a ‘solid performance in 2021, with growth prospects thereafter unchanged.’
Refinitiv data indicates that analysts expect 2021 revenue to grow 5.5% to £1.2bn and operating profits to be 1% higher at £204m, giving earnings per share of 37.8p.
STRONG CASH FLOW
Net debt at 31 March was £509m, representing 1.8 times earnings before interest, tax, depreciation and amortisation (EBITDA), which means the company has around £330m of additional headroom against available debt facilities.
The business remained very cash generative last year with cash from operations 19% higher to £240.4m and free cash flow doubling to £83.4m.
