Homeserve hit by sales suspension

Repair services firm Homeserve posted a 2% rise in half year pre-tax profit as revenue jumped 25% and said it was confident for 2012 despite one-off restructuring costs of up to £10m in the second half.

HomeServe, which has been hit by a string of broker downgrades after the recent mis-selling scandal, said pre-tax profit rose to £18.2m for the six months ended 30 September £17.8m a year earlier. Revenue for the period grew to £213.1m from £171m previously.

Chief executive Richard Harpin said, "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."

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"Our UK business has put in place a programme to reinvigorate our customer focus. There will be some additional costs to achieving this but we firmly believe that the programme is in the interests of our customers," said Harpin.

The group, which sells insurance cover for burst pipes and boilers, said it expects one-off restructuring costs of up to £10m in the second half of the year and on-going additional costs of up to £10m each year.

Homeserve's retention rate remains around 82.5%. Worldwide customers increased 11% to 5.1m while policy numbers rose 13% to 11.8m.

However Homeserve said a reduction in marketing in the current year will reduce customers by up to 5%. Renewals income in fiscal 2013 is expected to reduce by £15m.

Its International businesses now accounts for 66% of the total household market and 40% of its total 5.1m customers.

US gross new policy sales were up 46% and customer numbers are now 0.98m. In Spain customer and policy numbers rose 86% and 95% respectively. It has also extended its test marketing agreement in Italy.

An interim dividend of 3.63p has been recommended, up from 3.3p a year earlier.

Net debt reduced to £36.6m from £61.5m in 2010.

Homeserve said it remains confident of delivering a solid performance in 2012 and beyond.

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