HomeServe faces 34.5 mln stg mis-selling penalty

Mon Jan 13, 2014 4:07am EST

Jan 13 (Reuters) - Repair and insurance group HomeServe Plc said it received a notice from UK's financial regulatory authority, proposing a penalty of 34.5 million pounds ($56.87 million) relating to alleged mis-selling practices.

HomeServe said the proposed penalty, which assumes a 30 percent discount for early settlement, was higher than the company had budgeted.

The company, which has been under investigation by UK's Financial Conduct Authority since last May, said it would engage in discussions with the regulator to finalise the notice.

"We believe the fine is much larger than anticipated and is worth 9 pence off the price of the stock on a purely cash out basis," Numis analyst Mike Murphy said, downgrading the stock to "hold" from "buy". It has a price target of 286 pence on the stock.

However, Liberum analysts raised their rating on the stock to "buy" from "hold", saying HomeServe has taken a major step in putting its regulatory issues behind it. The brokerage also increased its price target on the stock to 330 pence from 250 pence.

HomeServe, which provides customers home repair services such as plumbing, central heating and air conditioning under 12-month contracted memberships, said ongoing activities at its UK business remained unaffected by the notice.

HomeServe, formerly known as Fastfix, was investigated by Britian's telecoms regulator Ofcom in 2012, on allegations that its call centre staff were calling customers and then abandoning the calls, leaving potential clients with a silent line.

Following the allegation, the British company laid off 200 employees. Ofcom imposed a fine of 750,000 pounds on HomeServe.

Shares in the company were up about 4 percent at 293 pence at 0903 GMT on the London Stock Exchange.

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