* Shares down 9.33 pct to 202 pence
* Says UK customer numbers will fall until 2014
* Hopes for growth abroad to offset UK decline
(Adds details on profit warning, market reaction)
By Christine Murray
LONDON, March 22 HomeServe warned on
profits for the next two years on Friday saying changes in
marketing policies had failed to halt falling customer numbers
in Britain for its household repairs and insurance services.
Shares in the firm, which is being investigated by
regulators over policy mis-selling concerns, were down by over
10 percent at 200 pence by 1056 GMT on Friday.
The firm said that it expects UK customer numbers to hit a
low of 1.9 million in the year to March 2014, below analyst
forecasts and down nearly a third on the 2.7 million it had last
year and 2.25 million in the year just ending.
Andy Brown, an analyst from Panmure Gordon, said that the
Financial Standards Authority investigation launched in May was
making the firm more cautious in its marketing, meaning that it
was not winning enough new business to offset customers not
renewing existing policies.
"Now what we're seeing is the group having to operate within
much stricter guidelines," he said, adding that the wide range
of possible outcomes from the investigation makes the firm very
tricky to value.
HomeServe, which sells cover for houshold emergencies such
as boiler breakdowns and burst water pipes, said it expects its
UK business to contribute 35 million pounds ($53 million) less
than expected in the next financial year ending March 2014.
It hopes to partially offset the fall in business by cutting
jobs to save it 10 million pounds.
It announced 300 job losses today on top of 300 announced
previously. Last year the company said it employed over 2,700
people in the UK, out of a group total of around 4,000.
The firm first suspended British telesales in October 2011
after an internal review raised concerns over how its policies
were being marketed and sold.
Chief Executive Richard Harpin, who set up the firm in 1993,
said on Friday that HomeServe had ended most of the cold-calling
it had conducted previously and was focused on selling new
policies via partnerships with utility firms who offer the
services under their own brand.
However, he said that direct mailing by post was still the
most effective way of winning new customers, who are mostly
Since the market was first informed of problems around
marketing the shares have more than halved in value, falling
from 485 pence at the end of October 2011.
Panmure's Brown, who has a "sell" rating on the stock, said
that opinion was still quite divided on the stock and that it
was unlikely that big shareholders would sell as a result of
HomeServe is trying to offset the shrinkage of its British
business by taking its business model abroad, and customer
numbers in the U.S. business are expected to have risen by 20
percent in the last year.
The firm said that it is aiming for a roughly even split for
profits between the British and international business in the
Analysts are predicting a 17 percent fall in pre-tax profits
to 105 million pounds in the year just ending, which the company
is due to report on in May, according to Thomson Reuters I/B/E/S
HomeServe said on Friday that its profit for the past year
would be in line with expectations, excluding exceptional items
of a 4 million-pound charge to pay for announced layoffs and a
15 million-pound writedown on an acquisition in France.
It said that it expects the business to return to modest
growth in the year ending March 2015.
($1=0.6588 British pounds)
(Editing by Greg Mahlich)