HomeServe expects profits in line with expectations

HOME emergency business, HomeServe has said its full-year pre-tax profits are likely to be in line with expectations as it continues to reshape its UK business following its mis-selling scandal.

The Walsall-based company said it expected its UK customer numbers for 2013 to be within target at around 2.25m; the firm had estimated the figure would fall somewhere between 2.2 to 2.4m.

IN an interim management statement covering the period from October 2012, the firm said its retention rate had, as expected, increased slightly from the 78% reported for the first half of the year.

Direct mail and outbound telephony sales channels have historically provided the majority of the firm’s new customers in the UK.  It said while direct mail would continue to be a key operation going forward, take up rates from current campaigns were still lower than historic levels.

“We are currently focusing outbound telephony channel on sales to existing customers only.  We are therefore developing additional ways of acquiring new customers through a broader range of channels including the internet and sales through our partners’ call centres,” said the statement.

“The effectiveness of our marketing campaigns and our retention rate will help to determine the future shape and size of the UK business.”
 
It said winter plans had been successfully implemented and it had been able to handle an increased volume of calls and repairs.

Customer complaints, which reduced by 42% in the first half of the year, have continued to reduce compared to the same period last year.  

The FSA investigation into the firm’s indiscretions is ongoing and is expected to continue for a number of months.  The firm said that during the past few months it had begun the process of re-contacting customers who may be upset as a result of the way in which they were sold their policy.

Internationally, the firm said its US division had been boosted by two new affinity partnerships representing 224,000 households.  It has also agreed partnerships with SourceGas in Arkansas and City of Des Moines, a water utility in Iowa.
 
Customer numbers at March 31, 2013 are expected to be up 20% on last year, which itself saw a rise of 16% on the previous year.

However, the strong growth in revenue, driven by the increase in customers and policies, will be partially offset by the cost of increased marketing activity together an ongoing investment in people and infrastructure.  As a result, US operating profit is expected to be slightly higher than the £9m reported in 2012.
 
Operations in France and Spain performed well, while the firm said it continued to invest in new markets in Italy and Germany.

Net debt at the end of December 2012 was £60m (December 2011: £109.7m) and this is expected to fall further by the year end.