Homeserve

Home maintenance and emergency repairs concern Homeserve has warned that its reduction in customer numbers is 3% higher than expected.

The fully listed concern warned in a trading update for its third quarter it expects a 3% decline in customer numbers as a result of its 'partner sales and marketing acvitity' taking 'longer to restart' than it anticipated. Last October a Deloitte report found the company's telesales team had engaged in mis-selling its products. Homeserve notes the FSA is holding what it describes as a 'regular and constructive dialogue' with the company.

For 2013 it expects renewal rates in 2013 to be £10m lower than the previous year with the group noting it is expecting to cut its UK headcount by 200 persons (7% of its workforce) as a result of a 'smaller outbound telephony operation'. One off costs related to the redunancies are expected to be in the region of £20m.

In the US retention rates stood at 80%, 'slightly lower' than the 80% reported last year as a result of what it described as the 'increased proportion of first year and own brand renewing policies'. Net debt as of December stood at £109.7m.

Analysts at Panmure Gordon are forecasting pre-tax profits of £126m (EPS: 27p) for the year to March 2012. In 2013 profits of £115m (EPS: 24.7p) are expected.

Growth Company Investor recommended avoiding shares in Homeserve last October at 340.5p following the publication of the Deloitte report into its mis-selling and the shares have since slumped 27% to the current price of 247.2p. At the current price with the ongoing damage from the mis-selling and the possibility existing of an FSA fine we rate the shares as a sell.