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Homeserve (HSV) 591p
Gain to date: 40%
Original entry point: Buy at 421p, 3 December 2015
The home emergency, repair and heating installation group has delivered a superb result for investors over the past year – and we see a continuation of this trend going into 2017.
The shares are up 40% since we said to buy in early December 2015. That’s more than four times the 8.2% return from the FTSE All-Share index over the same period.
Half year results on 22 November 2016 showed a 20% rise in sales to £314.3m and adjusted pre-tax profit up 9% to £28.7m.
Total customer numbers increased by 14% to 7.5m in the six months to 30 September year-on-year. Overseas operations have been the real driver with UK customer numbers ‘only’ up 2%.
Retention rates slipped in the UK from 83% to 80%. In contrast, it maintained retention in France at 89% and only saw a minor dip in the US from 82% to 81%. The US now accounts for more than a third of Homeserve’s customers.
The investment case is centred on Homeserve replicating its UK success in other parts of the world. It is fair to say the company is doing an excellent job, in our opinion. Management hope to eventually operate in 15 countries.
We remain positive on the stock despite the UK retention slippage. This is a highly cash generative company with a proven business model that it can roll out globally. (DC)
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