HomeServe face an uncertain 2012

HomeServe, the British home repair company that also offers insurance, is expected to face even greater costs than expected because of concerns that products were being mis-sold.
Last October, all sales from the company were suspended as staff were retrained because of thousands of complaints from consumers. The company also announced that 200 jobs are going to be lost as the company restructures.
 The company recently announced that they expect the number of customers they have to fall by nearly 10 percent this year, which is much higher than the initial five percent reduction they previously expected. This puts the expected revenue for the company at £10 million less than what they had previously expected. It is in line with what the market expected them to turnover, which is just less than £130 million.

Since the company suspended its marketing activities the shares have fallen by over 40 percent and the recent announcement about the worst predictions has caused 10 percent of this. An independent report by Deloitte showed that there were concerns last year about what services customerss were being sold and this caused the company to suspend all telesales operations.

The company announced that they would be using their marketing budget to overhaul the bad practices that were occurring within the company. HomeServe are communicating regularly with the Financial Services Authority and they have made it clear that they are not under any investigation.

Richard Harpin is the Chief Executive of the company and he has commented, “We are in communication with the FSA and they are offering us advice but we’re not being investigated by them.” The company offers insurance policies for when pipes burst or boilers need fixing and it has around 5 million customers in the UK.

Since the revelations about the bad selling techniques the company have taken dramatic efforts to improve their operating practices which has involved a cut of 200 jobs, which is about seven percent of all people employed by the company in the UK. They have however announced that no more job cuts are expected.

The customer complaints branch of the company is also being restructured and it is estimated that the entire change is going to cost around £20 million. This is twice the amount the company initially estimated. Customer retention rate was over 80 percent last year and this year they expect to see a decrease of about three percent on this figure.

Mail marketing was recently resumed and its inbound call centre was also reopened. Outbound telemarketing has remained closed and there has not been a new start date specified by the company.

Andy Smith is a securities analyst at the company Charles Stanley and he commented, “The firm probably have some more tough times yet to come and we are still predicting that HomeServe is going to perform poorly in the near future. We expect that it is going to be some time before the new policies established by the company become profitable.”