HomeServe surges as it says FY results will be at upper end of market views

HomeServe surged on Thursday after saying that its full-year results are anticipated to be at the upper end of market expectations thanks to strong momentum in the business.

The range of analyst forecasts for adjusted pre-tax profit for the year is £105m to £112m.

In a trading update for the year to the end of March 2017, the company said it has had "a very good year", now offering products to more than 100m affinity partner households and with 7.8m customers.

It has made rapid progress in the US, with 50m affinity partner households and 3m customers at the year-end. It also highlighted the successful integration of Utility Service Partners, which is on track to deliver $15m earnings before interest, taxes, depreciation and amortisation in full-year 2018.

Chief executive Richard Harpin said: "I am delighted with our performance this year. Given the strength of our strategic and operational progress, we anticipate delivering a performance at the upper end of expectations for the year ended 31 March 2017.

"This progress, combined with excellent prospects in all our businesses will provide the platform for further strong growth next year."

HomeServe said the UK business had another good year, with customer growth of 1% and retentions strong at 80%.

In the US, it noted "significant" expansion in respect of partner households as it makes progress towards the long-term target of 80m announced at its capital markets day back in June.

Meanwhile, the businesses in France and Spain continued to deliver customer growth.

RBC Capital Markets pointed out that the stock has underperformed the sector by 15% year-to-date and the valuation of 17.5x 18E price-to-earnings and EV/EBITA 13.3x is now a circa 15% discount to other defensive growth names.

"We would use the recent outperformance as a buying opportunity," it said, as it reiterated its 'outperform' rating.

At 1440 BST, the shares were up 8.8% to 616.50p.