HomeServe making progress despite £34.5m fine

WALSALL-based home emergency business HomeServe suggests it is making headway in stabilising its UK business.

And this is in spite of the fact it has been forced to put aside £34.5m to pay off victims of a mis-selling scandal. 

In an interim management statement for the period from October 1 last year, HomeServe said it is making good progress in stabilising its UK business and is continuing to invest in and grow its international businesses with new affinity partnerships.

It also said it is growing customer numbers and earnings.
 
HomeServe expects its adjusted profit before tax for the year ending March 31  to be in line with market expectations.
 
In the UK, customer numbers at 31 December 2013 were 2.1m.

The statement said: “We now have greater confidence our UK business will stabilise customer numbers at a level of at least 2m.  While currently in the peak renewal period, recent product enhancements and improved customer satisfaction are delivering a good retention performance and we expect full year retention to increase from the 81% reported in the first half of the year.

“The increased cost of these product enhancements, a higher number of new customers and providing improved customer service are expected to result in net income per customer for the year to 31 March 2014 being lower than the prior year. Marketing activity has increased relative to the prior period and is performing in line with our expectations. The cost of our customer re-contact exercise is in line with expectations.”

In January the firm received the Financial Conduct Authority’s (FCA)’s Draft Warning Notice relating to the investigation into historic mis-selling issues at HomeServe. 

The FCA proposed a financial penalty of £34.5m and as a result HomeServe increased its provision by £30m.

HomeServe said it continues to develop its US business. As at March 31, customer numbers are expected to be around 15% higher than the prior year (FY2013: 25%).  Retention is strong with the rate expected to be around 80% for FY2014 (FY2013: 79%). 
 
Its US business has signed nine new affinity partnerships representing 600,000 partner households since March 31. “We continue to expect strong growth in full year operating profit,” the firm said.
 
HomeServe’s French and Spanish are also said to be performing strongly while in Italy it says it is making good progress in developing sales channels and marketing activity. Discussions continue with potential partners in Germany.
 
The firm says it continues to have a strong balance sheet with significant headroom against its committed facilities of £250m.