Homeserve profit falls, maintains dividend - UPDATE

21st May 2013 07:09

Home emergency repairs group HomeServe saw full year profits decline but expressed confidence that customer numbers would stabilise as its international businesses continues to grow.The group, which insures customers against burst pipes and broken boilers, also removed a major uncertainty as it provided a £6m provision to cover costs and a potential fine from an ongoing investigation by the UK regulator, the Financial Conduct Authority.While revenue rose 2.2% to £546.5m in the year to March 31st, adjusted pre-tax profit fell 20% from £126.0m to £105.0m, although this was in line with expectations. But Homeserve underlined its confidence in future trading and maintained its dividend payment at 11.3p per share.Chief Executive Richard Harpin said: "Our UK business has enhanced its controls and governance and significantly improved its customer service over the past year. We have clear sales and marketing plans for increasing both customer acquisition and retention and expect UK customer numbers to stabilise at around 1.9m from March 2014."UK customers have fallen sharply amid the investigation into alleged mis-selling by the FCA, which is expected to take several more months to conclude. Harpin said he remained confident that plans for stable UK customer numbers together with continued strong growth in the international businesses will allow the group overall to return to "modest growth" in 2014 and 2015. He added that Homeserve has made good progress in growing international business over the year such that they now account for over 50% of customers. "We continue to increase the number of international affinity partners, with 12 new agreements signed during the past year covering over 5m households."Homeserve issued a profit warning in March and warned that falling UK customer numbers over the next two years mean would mean around 300 jobs will be cut. The cuts will lead to a £4.0m exceptional charge but also result in £10m of savings.Broker Panmure Gordon noted a good performance on cash flow, with net debt better than expected at £43m. Analyst Andy Brown maintained a cautious stance due to "uncertainties" following the ongoing FCA investigation. "The provision for its costs and potential fine, if achieved, is lower than expected and removes a major uncertainty. "The trading outlook remains tough but with a 5% dividend yield we see share price support. The outlook for the share price remains challenging but we see less downside risk."CJ & OH