A couple of days after denying it was in takeover talks, troubled insurance and repairs group Homeserve has issued a soothing annual meeting statement.
The company's shares jumped 13% earlier in the week following reports that private equity groups were looking it over following its much publicised misselling problems. Homeserve promptly said it was not in any discussions, but investors clearly believed it could now be vulnerable to an approach.
In its latest update Homeserve said it was making progress in simplifying and refocussing its business, although the investigation into its past actions by the Financial Services Authority are likely to hang over it for months. Even so, the shares have added 10.1p to 198.54p following the statement. Analyst David Brockton at Espirito Santo said:
HomeServe's AGM statement signals no change in business conditions and in this respect is positive, in that it contains no new negative news.
In the UK, progress is reportedly being made refocusing the business and the FSA investigation continues. Internationally, all regions continue to grow customers and policies. A new water utility, Alameda County, has been signed in California providing access to 80,000 households and test marketing has now been started with BS Energy in Germany. Net debt stands at £61m, slightly lower than the year-end position of £66m.
We maintain a neutral rating, awaiting greater clarity on regulatory risk and evidence of sustainability in gross adds.
Caroline de La Soujeole at Seymour Pierce said:
The shares are trading on a prospective PE of 7.6 times 2013 estimated profits, which seems fair to us given the ongoing problems in the UK.
The shares have rebounded this week following rumours, promptly denied by the company, that it was being preyed upon by private equity. With an FSA investigation still ongoing we would give little credence to these rumours. We reiterate our hold recommendation but move our target price from 150p to 175p.
