The elephant in the room has finally found its voice and with a Financial Services Authority (FSA) investigation under way, customers leaving in droves and retention rates slipping, Homeserve looks on increasingly shaky ground. Full-year results from the emergency repair maintenance specialist showed underlying pre-tax profit up 8 per cent to £126m and a healthy dividend increase, but given that mis-selling fears only came to light in October the real concern is what lies ahead. Investors are not waiting to find out and the shares crashed 27 per cent post results.
Customers in the UK declined 10 per cent to 2.7m and retention rates slipped from 83 to 80 per cent in the latest 12 month period. However, chief executive Richard Harpin told the Investors Chronicle that customers have fallen a further 9 per cent since the March year-end and he expects the UK customer base to shrink to around 2.2-2.4m by March. This is a worry since the UK accounts for 80 per cent of group profits so progress made by Homeserve's US, French and Spanish businesses will not be enough to offset the lost profits.