Compensation costs eat into Homeserve's full-year profit

20th May 2014 07:33

- Mis-selling costs knock down profit - Good progress on stabilising UK business- Strong growth in the US, Spain, dividend on holdHome emergency repair group HomeServe said costs related to the mis-selling of insurance products ate into full-year profit but it is confident of future progress as it looks to the US for growth opportunities.The FTSE-250 group said statutory pre-tax profit fell to £24.4m for the year ended March 31st 2014 from £66.5m before. This includes exceptional costs of £46.7m in relation to the mis-selling scandal.An investigation by the Financial Conduct Authority (FCA) found "serious, systemic and long-running failings" at the firm. It found that customers, many of which were "vulnerable pensioners" were taken advantage of.Homeserve was fined a record £30.6m by regulators for mis-selling insurance products and was forced to pay out £16.7m to affected customers in redress. Chief Executive Richard Harpin said: "We have made good progress in stabilising the UK business by focusing on improving customer service, increasing retention and delivering effective marketing. Strong customer growth in the US and Spain has contributed to the growth in total customer numbers to 5.5m."Revenue increased to £568.3m during the period from £546.5m a year earlier. Basic earnings per share tumbled to 3.1p from 12.9p the previous year."The US remains our greatest opportunity and during 2015 we intend to increase investment in marketing and business development to take advantage of this. All our businesses are progressing in line with our expectations and we are confident of making further progress in 2015," he added. The group reported 19% customer growth in the US while customer numbers more than doubled in Spain.Homeserve has recommended the dividend be kept at 11.3p per share.CJ