HomeServe forced to set aside £19m after under-estimating customer reimbursements
HOME emergency and maintenance group HomeServe has been forced to allocate a further £19m to compensate customers affected by its mis-selling scandal after under-estimating the number of people needing to be reimbursed.
The Walsall company spoke about the exceptional charge in its interim report when it spoke about the legacy of the scandal which rocked the business two years ago.
It said it had completed re-contacting customers whose complaints had not been handled correctly during the winter of 2010, while it expects to have contacted all the customers who may have suffered “detriment” as a result of the way in which they bought their policies by the end of March 2014.
“We are fully committed to ensuring fair outcomes for all our customers and addressing any detriment incurred,” it said.
“The population of customers, dating back to 2005, being re-contacted remains unchanged and we continue to believe that only a small proportion of these customers need to be reimbursed. As a result of the customers who we have already re-contacted, we have greater visibility of the number requesting a review and the value of reimbursements being made.
“This forecast is higher than our original estimate and we have therefore reflected this in these financial results, with an additional exceptional expenditure charge of £19m.”
The group said its performance in FY2014 would reflect the impact of the reduction in UK customer numbers. However, it added that as UK customer numbers stabilised from March 2014 and it continued to develop its International businesses, it expected the group to return to modest growth in FY2015.
“In the UK we remain focused on increasing new customer acquisition and retention as well as stabilising customer numbers. We now expect to stabilise customer numbers at around 2.0m from March 2014,” it said.
First half revenue was up 5% to £241.3m (H1 2013: £229.6m) and adjusted pre-tax profit was £25.6m (H1 2013: £25.6m). In the UK customer numbers reduced and totalled 2.2m at September 30, while overseas its International businesses continued to grow with customer numbers up 0.6m to 2.9m.
UK adjusted operating profit in the first half of the year was £22.0m (H1 2013: £26m) with the International businesses contributing £4.8m of operating profit, up from £1.1m in the prior period.
It said that over the last two years it had re-focused the UK business on the customer and made improvements to its service, culture, governance and controls.
“We continue to have a good constructive relationship with our Supervisory team at the Financial Conduct Authority (FCA). The FCA enforcement team’s investigation into our past issues is continuing,” it added.
