Homeserve to cut 200 jobs as struggles continue

FTSE 250 emergency repair group Homeserve has assured that full-year profits will be in line with expectations in spite of its recent travails that are still preventing the group from restarting some marketing operations.

With customer numbers falling and the restarting of outbound calls taking longer than ancitpated, the company has announced today that it will make hundreds of lay-offs in order to scale back its telesales operations.

The stock tanked in late October after the firm announced that it was temporarily suspending its UK sales and marketing activity following a review by audit firm Deloitte found "processes that did not meet the company's required standards."

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In the UK, the company said it is making progress in "reinvigorating" its customer focus and recommencing marketing activity but said that this is taking longer than expected. The group has now recommenced inbound sales calls for 14 of its 15 water utility partners and is currently awaiting approval from the remaining one. Direct mail marketing has also restarted.

"Utility partner customer acquisition activity remains on track and in line with our previous guidance. However, our focus on our key utility partners has meant that other partner sales and marketing activity has taken longer to restart than we originally anticipated," the group said.

As such, total customer numbers for the full-year are now expected by 8% lower than last year, worse than previous guidance of a 5% reduction. Renewal revenues for the current year are estimated to be below £10m, however the group expects this to be partly offset by lower operating costs.

As a result, the company has decided to cut its UK headcount by 200 in order to focus on marketing and create a smaller outbound telephony operation.

Nevertheless, Homeserves expects adjusted pre-tax profit to be within analysts' expectations of around £122-132m for the year ending March 31st.

Net debt jumped from £59.2m in December 2010 to £109.7m, which includes the cash consideration of £83m relating to December's purchase of Veolia's 51% interest in Domo.

BC