Milder than forecast winter aids acquisitive Homeserve
Tuesday 23 May 2006
The emergency repair group Homeserve unveiled a better than expected 28 per cent jump in its annual pre-tax profits yesterday, boosted by a milder than forecast UK winter.
Richard Harpin, the company's chief executive, said the group had cashed in following predictions of an unusually harsh winter in Britain at the end of last year, which encouraged many more people to take out home emergency cover.
However, the harsh weather conditions did not materialise, with claims staying at relatively normal levels for the period.
Shares in the company leapt 7 per cent on the news yesterday, unwinding some of the heavy price falls of the past few weeks. However, they gave up half of the gains later in the day to close at 1407p, giving the company a market value of £908m.
The company's strong growth in profits was underpinned by a 66 per cent rise in revenue to £367m for the year, helped along by a handful of small acquisitions over the year.
Mr Harpin said that the company planned to continue its acquisitive streak over the coming year, particularly outside of the UK.
Although the group has favoured smaller bolt-on acquisitions to date, he said the company could easily fund a deal of "a few hundred million pounds" by raising its debt levels, if the right opportunity came along.
Mr Harpin added that he believed the growth prospects in the UK remained strong, as people became increasingly concerned about cowboy tradesmen.
"The market is being driven by disaster stories of plumbing emergencies, cowboy plumbers and people not being able to get somebody out to do an emergency repair," he said.
Revenues and profits at Homeserve grew across all divisions over the year, with the exception of its furniture warranties business, which has struggled since Courts went bust at the end of 2004. The division made an operating loss of £1.5m over the year.
However, Mr Harpin said that the company had won several new key contracts over the past few months, including one with Debenhams, which he said would help restore the division to profitability.
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