- Homeserve reports full year results in line with expectations
- American business continues to be the star performer
- Market unconvinced on a counterbid for the group
The market was unmoved by speculation that Brookfield’s £12 cash offer for home repair service group HomeServe (HSV) leaves the door open for another bid, as it announced an in line set of full year results. The shares edged 1% higher to £11.62.
Full year revenues increased 10% from £1.3 billion in 2021 to £1.42 billion in 2022, underlying earnings before interest and tax increased by 15% from £214 million in £247 million.
Fully diluted earnings per share increased by 15% to 49.3p. The dividend has been suspended as a result of Brookfield’s recommended offer.
On a geographic basis, the US remains ahead of schedule. Customers increased 3% to 4.8 million and the retention rate was flat at 85%. In France and Spain the business performed well with a marked pick up in the Spanish claims handling business.
Spanish profits increased 18% from £17.7 million to £20.8 million. In France earnings before interest and tax moved ahead by 2% from £34.6m. In the UK customer numbers appear to be bottoming, with the number of customers declining by 8% to 1.5 million.
A FURTHER BID
On 19 May Brookfield announced that it had reached an agreement on the recommended £12 per share cash offer for HomeServe.
This equates to 71% premium to the share price on 23 March. From a valuation perspective this represents a 2022 enterprise value/earnings before interest and tax of 15.5x and a price earnings ration of 22.3x.
It has been noted that although the shares have increased 65% since the news of a potential bid, the current rating represents a premium of only 22% and a 12% discount to where the shares traded one and two years ago.
Several institutional investors are looking for a share price in the teens. This has prompted speculation that there might be scope for a counterbid.
