Profits warning as Homeserve axes 300
eMBATTleD domestic disaster insurer Homeserve issued yet another profits warning yesterday as it axed hundreds more jobs.
Hundreds of thousands of customers are expected to desert the group, which is being investigated by the FSA for potential mis- selling of policies, over the coming year.
Falling customer numbers will hit Homeserve’s financial performance, founder and boss Richard Harpin warned.
The group is shedding a further 300 jobs in anticipation of the slowdown – on top of the 250 roles it axed last year.
The vast majority of those are in customer service.
Homeserve, which offers boiler and plumbing cover, has been beset by bad news since discovering holes in its safeguards preventing cold-calling sales teams from mis- selling at the end of 2011.
The number of UK customers – currently at 2.25m – will fall by 350,000 by this time next year, Harpin warned. The numbers have fallen sharply from 2.7m in early 2012.
He also confirmed the probe into potential mis- selling, launched last year, will continue ‘for a number of months’.
Before the FSA launched its investigation in June, Homeserve cut all out-bound sales calls – a move which analysts say pre- vents it from winning new business in the UK. ‘Obviously we’re keen to be able to draw a line in the sand and move on,’ Harpin added.
The group is pursuing ways to attract more customers without cold-calling.
Measures include direct mail to those who buy new boilers, and promotion on the internet.
By 2014 Homeserve hopes to be able to replace as many customers as it loses, which the com- pany is currently haemorrhaging at a rate of 20pc.
Homeserve will incur a £4m charge from the job cuts and will also write down £15m from the value of its French business. But the Spanish business is growing at 30pc a year, Harpin said.
it will take another eight months to finish compensating all of the customers who were potentially mis-sold policies, but Harpin said the costs would not run over the £23m which was set aside last year. However the continuing woe will mean ‘ an extremely tough ride for investors,’ warned analyst Andy Brown at Panmure gordon.
‘earnings downgrades will raise questions about dividend sustainability’, he added.
Shares, which fell by a third on the day the FSA launched its probe last year, shed a further 5pc to finish 11.3p lower at 211.4p. The stock has fallen from a peak of 525p in 2011.