Restructure costs expected to hit £10m at HomeServe

COSTS relating to the recent mis-selling probe at Black Country domestic repairs plc HomeServe have failed to dent profits.

In its interim results for the six months ended September 30, 2011, the Walsall firm reports today a 25% rise in revenue from £171m to £213.1m and a climb of 7% in adjusted operating profit from £22.7m to £24.3m.

Adjusted profit before tax rose by 10% from £21.3m to £23.5m and adjusted earnings per share climbed by 11%, from 4.7p to 5.2p. Net debt now sits at £36.6m, down from £61.5m in H1 2011.

Last month, HomeServe announced it had suspended all its marketing calls in order for staff to undergo fresh training following reports certain staff had been mis-selling insurance products, particularly in relation to pricing and policy details.

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The company said today there had been progress in developing new sales scripts and retraining call centre agents and it had received detailed feedback from the Financial Service Authority which was consistent with the issues it was addressing.

One-off restructuring costs, fees and other expenses of up to £10m were expected in the second half of the year, the statement added.

It said there would also be on-going additional costs related “to reinvigorating our customer focus and processes” of up to £10m per year.

Chief executive Richard Harpin said: “The group delivered a good first half financial performance as customers continue to value our products and services as evidenced by our global retention rate which remains high at 83.3%.

“We were disappointed to have found evidence of a shortfall in our standards in our UK sales and marketing procedures.

“We are taking decisive action to address these issues to ensure that our practices meet the high standards that both we and our customers expect.

“Our international businesses continue their growth and now account for 66% of the total household market and 40% of our total 5.1m customers.”