HomeServe sees profits rising despite mis-selling scandal fallout
WALSALL home emergency business HomeServe says it making good progress re-focusing its UK business following a well-publicised mis-selling scandal and continues to grow its international operations.
The firm suspended sales and marketing activity in late 2011 following the scandal. Hundreds of jobs were slashed and the affair cost HomeServe an estimated £24m.
A Financial Services Authority (FSA) investigation into the matter is now underway.
But in a trading statement today the firm reports that adjusted pre-tax profit for the six months ending September 30 is expected to be higher than the prior period (HY12: £23.5m) principally due to the benefits of 100% ownership of French firm Doméo combined with a strong financial performance from that business.
In the UK HomeServe says it on track to achieve its full year customer number target of between 2.2m and 2.4m and a policy retention rate of around 80%.
Customer numbers at the end of September 2012 are expected to be around 2.5m (HY12: 3.0m) and the policy retention rate is expected to be around 78%.
“We are making progress in implementing our plans to reshape our UK business and restore its customer focus. Our affinity partners remain supportive of our actions and in the past two months,” it said.
“We have successfully renewed two of our larger water company relationships. We are continuing to develop and implement our marketing plans, focusing on different creative propositions, with the next phase of testing expected to begin in the next few weeks.”
HomeServe says it is continuing to implement business improvement initiatives relating to governance and controls, sales and marketing and customer service all of which are consistent with the feedback received from its supervisory team at the FSA.
“We are already beginning to see benefits of these initiatives with increasing customer satisfaction and reduced complaints being received. We have also started our customer re-contact exercise,” it said.
UK operating profit is expected to be similar to the prior period (HY12: £25.8m) with lower revenue and the increased costs of improved governance and control being offset by reduced marketing activity and other efficiency savings.
HomeServe has revealed that its US business is achieving strong sales growth in customer and policy numbers with both expected to be around 20% higher at the end of September 2012 compared to September 2011.
In France, Doméo has maintained a high retention rate of around 87% and this, together with an increase in income per customer, is expected to result in a strong financial performance in the period.
In Spain, the number of customers and policies at the end of September 2012 is expected to be more than 35% higher compared to 30 September 2011.
HomeServe says it is continuing to invest in marketing in Italy and has also sent out its first test marketing campaigns in Germany.
The firm says that, as in previous periods, revenue and profit will be weighted towards the second half of our financial year reflecting the seasonality of itsmarketing activity and associated renewals profile.
