Homeserve reveals costs of mis-selling

 
Kasmira Jefford
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REPAIR and insurance specialist Homeserve has posted a pre-tax profit rise of ten per cent in the first half of the year, but warned that the possible mis-selling of its insurance products could cost the group up to £10m.

The firm, which offers insurance against burst pipes, broken down boilers and electrical problems, recently suspended outbound sales calls and retrained staff amid fears it has mis-sold policies.

Richard Harpin, Homeserve’s founder and chief executive, said the consequent reduction of marketing activity is likely to cut customer numbers by five per cent in the current financial year and renewals income in 2013 would fall by around £15m.

The firm said it faced an additional cost of £10m for restructuring, fees and other expenses, and a further £10m per year for “improving [its] “business and customer focus”.

Shares closed down by almost 10 per cent on the news yesterday.

Harpin said the group was disappointed to have found evidence of a shortfall in standards and that it had received detailed feedback from the Financial Services Authority.

Homeserve posted adjusted pre-tax profit of £23.5m, up from £21.3m in the same period in 2010, on revenues that climbed 25 per cent to £213.1m.

The group’s international arm accounts for 40 per cent of Homeserve’s 5.1m customers.