Broker snap: New clouds on the horizon at HomeServe, says Panmure

22nd Mar 2013 11:06

Panmure Gordon has retained its 'sell' rating and 145p target price for home emergency repairs group HomeServe, saying that Friday's profit warning raises questions about dividend sustainability.HomeServe said in a pre-close trading update that guidance for the current year (ending March 31st) remains unchanged with profit before tax (PBT) expected to be in line with the consensus estimate of £105.7m. However "there are new clouds on the horizon", according to Panmure analyst Andy Brown.The company said that falling customer numbers over the next two years mean that around 300 jobs will be cut, leading to a £4.0m exceptional charge. These will lead to £10m of savings though, Brown said. A writedown of its French warranty business will also lead to an impairment of £15m.Panmure has trimmed its full-year PBT forecast from £110m to £105m and has cut its 2014 estimate from £95m to £83.5m.Brown concluded: "Our cautious stance is driven by the uncertainties following its UK telesales issues and the subsequent, and on-going, FSA investigation. The share price has had a spike up mid-2012 due to speculation around private equity interest."With big downgrades coming through there will be uncertainty about the sustainability of the dividend which currently yields 5.6%; this has provided some support. The immediate outlook for the share price remains very challenging. We stay cautious."The stock was down 9.24% at 202.4p by 11:05 on Friday.BC