Cleaning services franchise operator Myhome International has made its first acquisition, snapping up Nicenstripy, which provides gardening also under a franchise system.

The OFEX-listed group paid £254,000 in new shares for a 56 per cent stake in the company, whose 25 franchisees turnover £2 million annually. Myhome chief executive Russell O’Connell himself already has a 38 per cent stake in Nicenstripy.

Myhome’s original business, developed by food and cleaning products giant Unilever, has enjoyed strong growth this year. A recent trading update showed that 39 franchisees have signed up, compared with just six a year ago.

Financial forecaster Equity Development consequently predicts that turnover will leap fourfold if this rate of growth continues. At present most revenue comes from the £20,000 Myhome receives from each new franchisee. Increasingly income will flow from the ten per cent of turnover each franchisee must pay the parent company.

A small £119,000 pre-tax profit is predicted in the year to this September, but this could leap to £907,000 next year, producing earnings per share of 4.5p. Thus the shares still show a modest forward p/e of 4.8 for that year. This does not include Nicenstripy’s contribution. Further acquisitions of home services businesses could also be made.

Shares have risen 50 per cent since we recommended them in June, putting them on a heady forward p/e of 36.4 for the current year. Smooth growth is by no means guaranteed and if the economy falters demand for the franchisee’s cleaning services may fall as customers switch to cheaper cleaners.

However, keep holding for now.

Myhome International	AIM	0pm	p	p
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Other company articles:
Myhome bites the dust			09/09/2008
Myhome breaches covenants			22/07/2008
New home for Pither			03/03/2008
Positive signs for plus			03/03/2008
Further expansion at MyHome			04/02/2008