HomeServe shares soar after home repair group reveals takeover bids

HomeServe shares jump 15% after home improvement group reveals takeover bids and extends bid deadline

  • HomeServe shares were the biggest riser in the FTSE 250 index on Friday
  • Brookfield is one of the largest alternative investment managers on the planet
  • Checkatrade online trader directory is owned by HomeServe

Shares of HomeServe soared on Friday after the home improvement company confirmed it had been approached for a possible takeover bid.

Last month, the company acknowledged it had attracted interest from private equity group Brookfield, one of the world’s largest alternative investment managers with around $690 billion in assets.

Since then, he said he had received a number of conditional offers from the Canadian financial giant, which his board had “carefully considered”.

Boom: HomeServe has been a major beneficiary of the Covid-19 pandemic as lockdown rules forced people to spend more time indoors and rely on home repair services

Brookfield had been given until 5pm yesterday by the City Takeover Panel to declare a potential bid for HomeServe or walk away, but that deadline has now been extended to May 19.

Following the announcement, HomeServe Shares climbed 14.9% to 980.5p on Friday, making it the highest rise in the mid-cap FTSE 250 index.

Based in the West Midlands town of Walsall and founded by Jeremy Middleton and current chief executive Richard Harpin, HomeServe has been a major beneficiary of the coronavirus pandemic.

Lockdowns across the world have encouraged many to engage in home improvement, as have the extra savings accrued by consumers and the suspension of stamp duty that the UK government introduced in the summer of 2020.

For financial year 2021, HomeServe’s revenue was up 15% year-on-year to £1.3bn, largely due to a one-fifth rise in sales in its US market, although profits before taxes fell by two-thirds.

Demand for her services remained strong, with her latest business update saying she had made “very good progress” over the past financial year.

Growth: For fiscal 2021, HomeServe's revenue grew 15% year-on-year to £1.3 billion, driven primarily by a one-fifth increase in sales in its US market.

Growth: For fiscal 2021, HomeServe’s revenue grew 15% year-on-year to £1.3 billion, driven primarily by a one-fifth increase in sales in its US market.

The company said its home-based expert division recorded its first-ever 12-month profit thanks to an outstanding performance from its subsidiary Checkatrade, where the level of paid transactions jumped to 47,000 and the average revenue per transaction reached £1,200.

Along with this, HomeServe revealed that there have been higher retention rates in its North American heating, ventilation and air conditioning business, as well as an increase in affinity partner households.

Following a positive trial in New York State, it recently launched “HVAC As A Service”, which provides customers with heating and air conditioning replacements, as well as annual upgrade coverage. up and down in exchange for a monthly payment.

Besides the United Kingdom and the United States, the company has a presence in France, Spain and Japan, where it has a joint venture with Mitsubishi Corporation, the country’s largest trading company.

As well as partnerships, HomeServe has grown through a series of acquisitions, including emergency home support group CET Structures and Merseyside-based domestic gas boiler service John Wilkinson.

Yet despite strong business growth, the company’s share price has fallen 20% in the past two years.

RBC Europe analysts Andrew Brooke and Karl Green say HomeServe’s current share price is “too cheap” given they expect the company to post decent full-year results next month. next.

They added: “We can see the appeal of taking the business private and investing for growth behind closed doors, especially for founder, CEO and major shareholder Richard Harpin.

“It would be a shame in our view, but it reflects the way the UK market currently values ​​stocks – stocks which have opportunities to invest for long-term growth appear to be penalised, while those which buy back stocks at high valuations are applauded. .’